3 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall 3 3 Project Management PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl

3 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall Examples of Projects  Building Construction  Research Project

3 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall Management of Projects 1.Planning - goal setting, defining the project, team organization 2.Scheduling - relates people, money, and supplies to specific activities and activities to each other 3.Controlling - monitors resources, costs, quality, and budgets; revises plans and shifts resources to meet time and cost demands

3 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall  Planning  Objectives  Resources  Work break-down structure  Organization  Scheduling  Project activities  Start & end times  Network  Controlling  Monitor, compare, revise, action Project Management Activities

3 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall Project Planning, Scheduling, and Controlling Figure 3.1 BeforeStart of projectDuring projectTimelineproject

3 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Project Planning, Scheduling, and Controlling Figure 3.1 BeforeStart of projectDuring projectTimelineproject

3 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall Project Planning, Scheduling, and Controlling Figure 3.1 BeforeStart of projectDuring projectTimelineproject

3 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall Project Planning, Scheduling, and Controlling Figure 3.1 BeforeStart of projectDuring projectTimelineproject

3 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall Project Planning, Scheduling, and Controlling Figure 3.1 BeforeStart of projectDuring projectTimelineproject Budgets Delayed activities report Slack activities report Time/cost estimates Budgets Engineering diagrams Cash flow charts Material availability details CPM/PERT Gantt charts Milestone charts Cash flow schedules

3 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall  Gantt chart  Critical Path Method (CPM)  Program Evaluation and Review Technique (PERT) Project Management Techniques

3 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall A Simple Gantt Chart Time J F M A M J J A S Design Prototype Test Revise Production

3 - 12© 2011 Pearson Education, Inc. publishing as Prentice Hall Service For a Delta Jet Figure 3.4 Passengers Baggage Fueling Cargo and mail Galley servicing Lavatory servicing Drinking water Cabin cleaning Cargo and mail Flight services Operating crew Baggage Passengers Deplaning Baggage claim Container offload Pumping Engine injection water Container offload Main cabin door Aft cabin door Aft, center, forward Loading First-class section Economy section Container/bulk loading Galley/cabin check Receive passengers Aircraft check Loading Boarding Time, Minutes

3 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall Project Control Reports  Detailed cost breakdowns for each task  Total program labor curves  Cost distribution tables  Functional cost and hour summaries  Raw materials and expenditure forecasts  Variance reports  Time analysis reports  Work status reports

3 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall  Network techniques  Developed in 1950’s  CPM by DuPont for chemical plants (1957)  PERT by Booz, Allen & Hamilton with the U.S. Navy, for Polaris missile (1958)  Consider precedence relationships and interdependencies  Each uses a different estimate of activity times PERT and CPM

3 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall Six Steps PERT & CPM 1.Define the project and prepare the work breakdown structure 2.Develop relationships among the activities - decide which activities must precede and which must follow others 3.Draw the network connecting all of the activities

3 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall Six Steps PERT & CPM 4.Assign time and/or cost estimates to each activity 5.Compute the longest time path through the network – this is called the critical path 6.Use the network to help plan, schedule, monitor, and control the project

3 - 17© 2011 Pearson Education, Inc. publishing as Prentice Hall 1.When will the entire project be completed? 2.What are the critical activities or tasks in the project? 3.Which are the noncritical activities? 4.What is the probability the project will be completed by a specific date? Questions PERT & CPM Can Answer

3 - 18© 2011 Pearson Education, Inc. publishing as Prentice Hall 5.Is the project on schedule, behind schedule, or ahead of schedule? 6.Is the money spent equal to, less than, or greater than the budget? 7.Are there enough resources available to finish the project on time? 8.If the project must be finished in a shorter time, what is the way to accomplish this at least cost? Questions PERT & CPM Can Answer

3 - 19© 2011 Pearson Education, Inc. publishing as Prentice Hall A Comparison of AON and AOA Network Conventions Activity onActivityActivity on Node (AON)MeaningArrow (AOA) A comes before B, which comes before C. (a) A B C BAC A and B must both be completed before C can start. (b) A C C B A B B and C cannot begin until A is completed. (c) B A C A B C Figure 3.5

3 - 20© 2011 Pearson Education, Inc. publishing as Prentice Hall AON Example ActivityDescription Immediate Predecessors ABuild internal components— BModify roof and floor— CConstruct collection stackA DPour concrete and install frameA, B EBuild high-temperature burnerC FInstall pollution control systemC GInstall air pollution deviceD, E HInspect and testF, G Milwaukee Paper Manufacturing's Activities and Predecessors Table 3.1

3 - 21© 2011 Pearson Education, Inc. publishing as Prentice Hall AON Network for Milwaukee Paper A Start B Start Activity Activity A (Build Internal Components) Activity B (Modify Roof and Floor) Figure 3.6

3 - 22© 2011 Pearson Education, Inc. publishing as Prentice Hall AON Network for Milwaukee Paper Figure 3.7 C D A Start B Activity A Precedes Activity C Activities A and B Precede Activity D

3 - 23© 2011 Pearson Education, Inc. publishing as Prentice Hall AON Network for Milwaukee Paper G E F H C A Start DB Arrows Show Precedence Relationships Figure 3.8

3 - 24© 2011 Pearson Education, Inc. publishing as Prentice Hall Determining the Project Schedule Perform a Critical Path Analysis  The critical path is the longest path through the network  The critical path is the shortest time in which the project can be completed  Any delay in critical path activities delays the project  Critical path activities have no slack time

3 - 25© 2011 Pearson Education, Inc. publishing as Prentice Hall Determining the Project Schedule Perform a Critical Path Analysis Table 3.2 ActivityDescriptionTime (weeks) ABuild internal components2 BModify roof and floor3 CConstruct collection stack2 DPour concrete and install frame4 EBuild high-temperature burner4 FInstall pollution control system 3 GInstall air pollution device5 HInspect and test2 Total Time (weeks)25

3 - 26© 2011 Pearson Education, Inc. publishing as Prentice Hall Determining the Project Schedule Perform a Critical Path Analysis Table 3.2 ActivityDescriptionTime (weeks) ABuild internal components2 BModify roof and floor3 CConstruct collection stack2 DPour concrete and install frame4 EBuild high-temperature burner4 FInstall pollution control system 3 GInstall air pollution device5 HInspect and test2 Total Time (weeks)25 Earliest start (ES) =earliest time at which an activity can start, assuming all predecessors have been completed Earliest finish (EF) =earliest time at which an activity can be finished Latest start (LS) =latest time at which an activity can start so as to not delay the completion time of the entire project Latest finish (LF) =latest time by which an activity has to be finished so as to not delay the completion time of the entire project

3 - 27© 2011 Pearson Education, Inc. publishing as Prentice Hall Determining the Project Schedule Perform a Critical Path Analysis Figure 3.10 A Activity Name or Symbol Earliest Start ES Earliest Finish EF Latest Start LS Latest Finish LF Activity Duration 2

3 - 28© 2011 Pearson Education, Inc. publishing as Prentice Hall Forward Pass Begin at starting event and work forward Earliest Start Time Rule:  If an activity has only a single immediate predecessor, its ES equals the EF of the predecessor  If an activity has multiple immediate predecessors, its ES is the maximum of all the EF values of its predecessors ES = Max {EF of all immediate predecessors}

3 - 29© 2011 Pearson Education, Inc. publishing as Prentice Hall Forward Pass Begin at starting event and work forward Earliest Finish Time Rule:  The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time EF = ES + Activity time

3 - 30© 2011 Pearson Education, Inc. publishing as Prentice Hall ES/EF Network for Milwaukee Paper Start 0 0 ES 0 EF = ES + Activity time

3 - 31© 2011 Pearson Education, Inc. publishing as Prentice Hall ES/EF Network for Milwaukee Paper Start A2A2 2 EF of A = ES of A ES of A

3 - 32© 2011 Pearson Education, Inc. publishing as Prentice Hall B3B3 ES/EF Network for Milwaukee Paper Start A2A EF of B = ES of B ES of B

3 - 33© 2011 Pearson Education, Inc. publishing as Prentice Hall C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20

3 - 34© 2011 Pearson Education, Inc. publishing as Prentice Hall C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20 D4D4 7 3 = Max (2, 3)

3 - 35© 2011 Pearson Education, Inc. publishing as Prentice Hall D4D4 37 C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20

3 - 36© 2011 Pearson Education, Inc. publishing as Prentice Hall E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20 Figure 3.11

3 - 37© 2011 Pearson Education, Inc. publishing as Prentice Hall Backward Pass Begin with the last event and work backwards Latest Finish Time Rule:  If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity that immediately follows it  If an activity is an immediate predecessor to more than one activity, its LF is the minimum of all LS values of all activities that immediately follow it LF = Min {LS of all immediate following activities}

3 - 38© 2011 Pearson Education, Inc. publishing as Prentice Hall Backward Pass Begin with the last event and work backwards Latest Start Time Rule:  The latest start time (LS) of an activity is the difference of its latest finish time (LF) and its activity time LS = LF – Activity time

3 - 39© 2011 Pearson Education, Inc. publishing as Prentice Hall LS/LF Times for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A2 20 LF = EF of Project 1513 LS = LF – Activity time

3 - 40© 2011 Pearson Education, Inc. publishing as Prentice Hall LS/LF Times for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A2 20 LF = Min(LS of following activity) 1013

3 - 41© 2011 Pearson Education, Inc. publishing as Prentice Hall LS/LF Times for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A2 20 LF = Min(4, 10) 42

3 - 42© 2011 Pearson Education, Inc. publishing as Prentice Hall LS/LF Times for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A

3 - 43© 2011 Pearson Education, Inc. publishing as Prentice Hall Computing Slack Time After computing the ES, EF, LS, and LF times for all activities, compute the slack or free time for each activity  Slack is the length of time an activity can be delayed without delaying the entire project Slack = LS – ES or Slack = LF – EF

3 - 44© 2011 Pearson Education, Inc. publishing as Prentice Hall Computing Slack Time Table 3.3 EarliestEarliestLatestLatestOn StartFinishStartFinishSlackCritical ActivityESEFLSLFLS – ESPath A02020Yes B03141No C24240Yes D37481No E48480Yes F No G Yes H Yes

3 - 45© 2011 Pearson Education, Inc. publishing as Prentice Hall Critical Path for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A

3 - 46© 2011 Pearson Education, Inc. publishing as Prentice Hall ES – EF Gantt Chart for Milwaukee Paper ABuild internal components BModify roof and floor CConstruct collection stack DPour concrete and install frame EBuild high- temperature burner FInstall pollution control system GInstall air pollution device HInspect and test

3 - 47© 2011 Pearson Education, Inc. publishing as Prentice Hall LS – LF Gantt Chart for Milwaukee Paper ABuild internal components BModify roof and floor CConstruct collection stack DPour concrete and install frame EBuild high- temperature burner FInstall pollution control system GInstall air pollution device HInspect and test

3 - 48© 2011 Pearson Education, Inc. publishing as Prentice Hall  CPM assumes we know a fixed time estimate for each activity and there is no variability in activity times  PERT uses a probability distribution for activity times to allow for variability Variability in Activity Times

3 - 49© 2011 Pearson Education, Inc. publishing as Prentice Hall  Three time estimates are required  Optimistic time (a) – if everything goes according to plan  Pessimistic time (b) – assuming very unfavorable conditions  Most likely time (m) – most realistic estimate Variability in Activity Times

3 - 50© 2011 Pearson Education, Inc. publishing as Prentice Hall Estimate follows beta distribution Variability in Activity Times Expected time: Variance of times: t = (a + 4m + b)/6 v = [(b – a)/6] 2

3 - 51© 2011 Pearson Education, Inc. publishing as Prentice Hall Estimate follows beta distribution Variability in Activity Times Expected time: Variance of times: t = (a + 4m + b)/6 v = [(b − a)/6]2 Probability of 1 in 100 of > b occurring Probability of 1 in 100 of < a occurring Probability Optimistic Time (a) Most Likely Time (m) Pessimistic Time (b) Activity Time Figure 3.12

3 - 52© 2011 Pearson Education, Inc. publishing as Prentice Hall Computing Variance Table 3.4 MostExpected OptimisticLikelyPessimisticTimeVariance Activity ambt = (a + 4m + b)/6[(b – a)/6] 2 A B C D E F G H

3 - 53© 2011 Pearson Education, Inc. publishing as Prentice Hall Probability of Project Completion Project variance is computed by summing the variances of critical activities  2 = Project variance =  (variances of activities on critical path) p

3 - 54© 2011 Pearson Education, Inc. publishing as Prentice Hall Probability of Project Completion Project variance is computed by summing the variances of critical activities Project variance  2 = = 3.11 Project standard deviation  p = Project variance = 3.11 = 1.76 weeks p

3 - 55© 2011 Pearson Education, Inc. publishing as Prentice Hall Probability of Project Completion PERT makes two more assumptions:  Total project completion times follow a normal probability distribution  Activity times are statistically independent

3 - 56© 2011 Pearson Education, Inc. publishing as Prentice Hall Probability of Project Completion Standard deviation = 1.76 weeks 15 Weeks (Expected Completion Time) Figure 3.13

3 - 57© 2011 Pearson Education, Inc. publishing as Prentice Hall Probability of Project Completion What is the probability this project can be completed on or before the 16 week deadline? Z=–/  p = (16 wks – 15 wks)/1.76 = 0.57 dueexpected date dateof completion Where Z is the number of standard deviations the due date or target date lies from the mean or expected date

3 - 58© 2011 Pearson Education, Inc. publishing as Prentice Hall Probability of Project Completion What is the probability this project can be completed on or before the 16 week deadline? Z=−/  p = (16 wks − 15 wks)/1.76 = 0.57 dueexpected date dateof completion Where Z is the number of standard deviations the due date or target date lies from the mean or expected date From Appendix I

3 - 59© 2011 Pearson Education, Inc. publishing as Prentice Hall Probability of Project Completion Time Probability (T ≤ 16 weeks) is 71.57% Figure Standard deviations 1516 WeeksWeeks

3 - 60© 2011 Pearson Education, Inc. publishing as Prentice Hall Determining Project Completion Time Probability of 0.01 Z Figure 3.15 From Appendix I Probability of Standard deviations 02.33

3 - 61© 2011 Pearson Education, Inc. publishing as Prentice Hall Variability of Completion Time for Noncritical Paths  Variability of times for activities on noncritical paths must be considered when finding the probability of finishing in a specified time  Variation in noncritical activity may cause change in critical path

3 - 62© 2011 Pearson Education, Inc. publishing as Prentice Hall What Project Management Has Provided So Far 1.The project’s expected completion time is 15 weeks 2.There is a 71.57% chance the equipment will be in place by the 16 week deadline 3.Five activities (A, C, E, G, and H) are on the critical path 4.Three activities (B, D, F) are not on the critical path and have slack time 5.A detailed schedule is available

3 - 63© 2011 Pearson Education, Inc. publishing as Prentice Hall Trade-Offs and Project Crashing  The project is behind schedule  The completion time has been moved forward It is not uncommon to face the following situations: Shortening the duration of the project is called project crashing

3 - 64© 2011 Pearson Education, Inc. publishing as Prentice Hall Factors to Consider When Crashing a Project  The amount by which an activity is crashed is, in fact, permissible  Taken together, the shortened activity durations will enable us to finish the project by the due date  The total cost of crashing is as small as possible

3 - 65© 2011 Pearson Education, Inc. publishing as Prentice Hall Steps in Project Crashing 1.Compute the crash cost per time period. If crash costs are linear over time: Crash cost per period = (Crash cost – Normal cost) (Normal time – Crash time) 2.Using current activity times, find the critical path and identify the critical activities

3 - 66© 2011 Pearson Education, Inc. publishing as Prentice Hall Steps in Project Crashing 3.If there is only one critical path, then select the activity on this critical path that (a) can still be crashed, and (b) has the smallest crash cost per period. If there is more than one critical path, then select one activity from each critical path such that (a) each selected activity can still be crashed, and (b) the total crash cost of all selected activities is the smallest. Note that the same activity may be common to more than one critical path.

3 - 67© 2011 Pearson Education, Inc. publishing as Prentice Hall Steps in Project Crashing 4.Update all activity times. If the desired due date has been reached, stop. If not, return to Step 2.

3 - 68© 2011 Pearson Education, Inc. publishing as Prentice Hall Crashing The Project Table 3.5 Time (Wks)Cost ($) Crash CostCritical ActivityNormalCrashNormalCrashPer Wk ($)Path? A2122,00022,750750Yes B3130,00034,0002,000No C2126,00027,0001,000Yes D4248,00049,0001,000No E4256,00058,0001,000Yes F3230,00030,500500No G5280,00084,5001,500Yes H2116,00019,0003,000Yes

3 - 69© 2011 Pearson Education, Inc. publishing as Prentice Hall Crash and Normal Times and Costs for Activity B ||| 123Time (Weeks) $34,000 — $33,000 — $32,000 — $31,000 — $30,000 — — Activity Cost Crash Normal Crash TimeNormal Time Crash Cost Normal Cost Crash Cost/Wk = Crash Cost – Normal Cost Normal Time – Crash Time = $34,000 – $30,000 3 – 1 = = $2,000/Wk $4,000 2 Wks Figure 3.16

3 - 70© 2011 Pearson Education, Inc. publishing as Prentice Hall Critical Path and Slack Times for Milwaukee Paper Figure 3.17 E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A Slack = 1 Slack = 0Slack = 6 Slack = 0

3 - 71© 2011 Pearson Education, Inc. publishing as Prentice Hall Advantages of PERT/CPM 1.Especially useful when scheduling and controlling large projects 2.Straightforward concept and not mathematically complex 3.Graphical networks help highlight relationships among project activities 4.Critical path and slack time analyses help pinpoint activities that need to be closely watched

3 - 72© 2011 Pearson Education, Inc. publishing as Prentice Hall Advantages of PERT/CPM 5.Project documentation and graphics point out who is responsible for various activities 6.Applicable to a wide variety of projects 7.Useful in monitoring not only schedules but costs as well

3 - 73© 2011 Pearson Education, Inc. publishing as Prentice Hall 1.Project activities have to be clearly defined, independent, and stable in their relationships 2.Precedence relationships must be specified and networked together 3.Time estimates tend to be subjective and are subject to fudging by managers 4.There is an inherent danger of too much emphasis being placed on the longest, or critical, path Limitations of PERT/CPM