Project Management Chapter 17

Learning Objectives Describe the project life cycle Give a general description of the critical path method Construct simple network diagrams Describe activity “crashing” and solve typical problems

What is Project Management? [YouTube] Introduction to Project Management https://www.youtube.com/watch?v=BOU1YP5NZVA

Projects Project Operations Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame Examples: Tucson Streetcar Producing a movie Product development Operations work done to sustain the business

The Nature of Projects Projects go through a series of stages – a life cycle Initiating Planning Executing Monitoring and Controlling Closing Projects bring together people with a diversity of knowledge and skills, most of whom remain associated with the project for less than its full life From project to project “on loan” Consulting firms Organizational structure affects how projects are managed Matrix organization: functional and project managers share workers and facilities.

Matrix management (Wikipedia)

MIS 373: Basic Operations Management Project Manager Project managers work with the project team and other people involved in a project to meet project goals The project manager is ultimately responsible for the success or failure of the project The project manager is responsible for: Work Human resources Communications Quality Time Costs Scope MIS 373: Basic Operations Management

MIS 373: Basic Operations Management Project Management Project management is “the application of knowledge, skills, tools and techniques to project activities to meet project requirements” (PMBOK® Guide, Fourth Edition, 2008) Involves continual trade-offs Manager’s job - manage these trade-offs. Project management knowledge draws on ten areas: Integration Scope Time Cost Quality Procurement Human resources Communications Risk management Stakeholder management MIS 373: Basic Operations Management

MIS 373: Basic Operations Management Source: PMBOK® Guide Integration Develop Project Charter Develop Project Management Plan Direct and Manage Project Work Monitor and Control Project Work Perform Integrated Change Control Close Project or Phase Scope Plan Scope Management Collect Requirements Define Scope Create Work Breakdown Structure Verify Scope Control Scope Time Plan Schedule Management Define Activities Sequence Activities Estimate Activity Resources Estimate Activity Durations Develop Schedule Control Schedule Cost Plan Cost Management Estimate Costs Determine Budget Control Costs Quality Plan Quality Perform Quality Assurance Perform Quality Control Human Resources Plan Human Resource Management Acquire Project Team Develop Human Resource Plan Manage Project Team Communication Plan Communications Management Manage Communications Control Communications Risk Management Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Responses Control Risks Procurement Plan Procurement Management Conduct Procurements Administer Procurements Close Procurements Stakeholder Management Identify Stakeholders Plan Stakeholder Management Manage Stakeholder Engagement Control Stakeholder Engagement MIS 373: Basic Operations Management

The Project Management Triangle Project’s Triple Constraints (Key Metrics) Quality Performance Objectives (Scope) Time Cost MIS 373: Basic Operations Management

MIS 373: Basic Operations Management Behavioral Issues Behavioral problems can be created or exacerbated by Decentralized decision making Stress of achieving project milestones on time and within budget Surprises The team must be able to function as a unit Interpersonal and coping skills are very important Conflict resolution and negotiation can be an important part of a project manager’s job MIS 373: Basic Operations Management

Tools in Project Management Key tools: Work Breakdown Structure Gantt charts Network diagram Critical path method Crashing MIS 373: Basic Operations Management

Work Breakdown Structure (WBS) A hierarchical listing of what must be done during a project Establishes a logical framework for identifying the required activities for the project Identify the major elements of the project Identify the major supporting activities for each of the major elements Break down each major supporting activity into a list of the activities that will be needed to accomplish it Project Level 1 Level 2 Level 3 Level 4 MIS 373: Basic Operations Management

Immediate Predecessor Gantt Chart start # Task Duration (weeks) Immediate Predecessor Weeks after start 2 4 6 8 10 12 14 16 18 20 1 Locate facility 8 - 3 Interview 4 Hire & Train 9 2 Order furniture 6 5 Remodel 11 Furniture setup 7 Move in 4,5,6 MIS 373: Basic Operations Management

Network Diagram Network diagram (precedence) Diagram of project activities that shows sequential relationships by use of arrows and nodes Activity on arrow (AOA) Network diagram convention in which arrows designate activities Activity on node (AON) Network convention in which nodes designate activities

Network Conventions (AON) b c e d (dummy) Start Node MIS 373: Basic Operations Management

Network Conventions (AOA) b c a c b a c a c b dummy Activity b d MIS 373: Basic Operations Management

Immediate Predecessor Precedence Diagram # Task Duration (weeks) Immediate Predecessor 1 Locate facility 8 - 2 Order furniture 6 3 Interview 4 Hire & Train 9 5 Remodel 11 Furniture setup 7 Move in 4,5,6 MIS 373: Basic Operations Management

Project Network – Activity on Node (AON) # Task Duration (weeks) Immediate Predecessor 1 Locate facility 8 - 2 Order furniture 6 3 Interview 4 Hire & Train 9 5 Remodel 11 Furniture setup 7 Move in 4,5,6 1 S 3 2 5 6 Locate facilities Order furniture Furniture setup Interview Remodel Move in 4 Hire & train 7 MIS 373: Basic Operations Management

Project Network – Activity on Arrow (AOA) # Task Duration (weeks) Immediate Predecessor 1 Locate facility 8 - 2 Order furniture 6 3 Interview 4 Hire & Train 9 5 Remodel 11 Furniture setup 7 Move in 4,5,6 Order furniture Furniture setup Remodel Locate facilities Move in Interview Hire and train MIS 373: Basic Operations Management

Critical Path Method (CPM) An analytical tool that provides a schedule that completes the project in minimum time subject to the precedence constraints. In addition, CPM provides: Starting and ending times for each activity Identification of the critical activities (i.e., the ones whose delay necessarily delay the project). Identification of the non-critical activities, and the amount of slack time available when scheduling these activities.

Critical Path Method (CPM) Sequence of activities that leads from the starting node to the finishing node Critical path The longest path; determines expected project duration Critical activities Activities on the critical path

Critical Path Method (CPM) CPM can assist in: Estimating project length Identifying which activities are most critical to timely project completion Indicating of how long any activity can be delayed without delaying the project

Project Network – Activity on Node (AON) # Task Duration (weeks) Immediate Predecessor 1 Locate facility 8 - 2 Order furniture 6 3 Interview 4 Hire & Train 9 5 Remodel 11 Furniture setup 7 Move in 4,5,6 Critical Path ? 1 S 3 2 5 6 Locate facilities Order furniture Furniture setup Interview Remodel Move in 4 Hire & train 7 MIS 373: Basic Operations Management

Immediate Predecessor Critical Path Critical path: the longest path # Task Duration (weeks) Immediate Predecessor 1 Locate facility 8 - 2 Order furniture 6 3 Interview 4 Hire & Train 9 5 Remodel 11 Furniture setup 7 Move in 4,5,6 1 S 3 2 5 6 Locate facilities Order furniture Furniture setup Interview Remodel Move in 4 Hire & train 7 8 11 9 Length of Path (1, 2, 6, 7) = 8+6+3+1 = 18 Path (1, 5, 7) = 8+11+1 = 20 Path (3, 4, 7) = 4+9+1 = 14 Critical path & expected finish time MIS 373: Basic Operations Management

Immediate Predecessor Gantt Chart Critical Path start # Task Duration (weeks) Immediate Predecessor Weeks after start 2 4 6 8 10 12 14 16 18 20 1 Locate facility 8 - 3 Interview 4 Hire & Train 9 2 Order furniture 6 5 Remodel 11 Furniture setup 7 Move in 4,5,6 MIS 373: Basic Operations Management

Forward Pass http://www.codeproject.com

Forward & Backward Pass http://www.codeproject.com

Early Start, Early Finish Early start (ES) The earliest time an activity can start Assumes all preceding activities start as early as possible For nodes with one entering arrow ES = EF of the entering arrow For activities leaving nodes with multiple entering arrows ES = the largest of the entering EF Early finish (EF) The earliest time an activity can finish EF = ES + t Finding ES (Early Start) and EF (Early Finish) involves a forward pass through the network diagram

Example – Forward pass (ES, EF) 6 8 14 3 14 17 B C 8 8 A 11 8 19 1 D 19 20 S G 4 4 9 4 13 E F

Late Start, Late Finish Late Finish (LF) The latest time the activity can finish and not delay the project For nodes with one leaving arrow, LF for nodes entering that node equals the LS of the leaving arrow For nodes with multiple leaving arrows, LF for arrows entering node equals the smallest of the leaving arrows Late Start (LS) The latest time the activity can start and not delay the project The latest starting time for each activity is equal to its latest finishing time minus its expected duration: LS = LF - t Finding LS and LF involves a backward pass through the network diagram

Example – Backward pass (LS, LF) 10 16 16 19 8 6 14 14 3 17 B 8 C 0 8 8 A 8 19 19 20 8 11 19 0 0 0 19 1 20 D S G 6 10 10 19 0 4 4 4 9 13 E F

Slack and the Critical Path Slack can be computed one of two ways: Slack = LS – ES Slack = LF – EF Critical path The critical path is indicated by the activities with zero slack 17-33

Example – Slack (LS-ES,LF-EF) 10 16 8 6 14 2 16 19 14 3 17 2 B 0 8 0 8 8 C A 8 19 8 11 19 19 20 0 0 0 0 0 D 19 1 20 S G 6 10 0 4 4 6 10 19 4 9 13 6 E F

Example – Critical Path Slack (LS-ES;LF-EF)=0 2 2 B C A D S G 6 6 E F

Example Solution Path Length (weeks) Slack S-A-B-C-G 18 2 S-A-D-G 20 Critical Path Path Length (weeks) Slack S-A-B-C-G 18 2 S-A-D-G 20 S-E-F-G 14 6

Using Slack Times Knowledge of slack times provides managers with information for planning allocation of scarce resources Control efforts can be directed toward those activities that might be most susceptible to delaying the project Activity slack times are based on the assumption that all of the activities on the same path will be started as early as possible and not exceed their expected time If two activities are on the same path and have the same slack, this will be the total slack available to both 17-37

CPM Disadvantages/ Problems Advantages: Forces managers to organize Important activities may be omitted Precedence relationships may not be correct Time estimates may be inaccurate May focus solely on critical path Advantages: Forces managers to organize Provides graphic display of activities Identifies Critical activities Slack activities

Time-Cost Trade-Offs: Crashing Shortening activity durations Typically, involves the use of additional funds to support additional personnel or more efficient equipment (and the relaxing of some work specifications) The project duration may be shortened by increasing direct expenses (e.g., additional personnel, more efficient equipment), thereby realizing savings in indirect project costs (e.g., facilities, supervision, incentives)

Crashing Activities 17-40

I-10 Widening: Prince Road to 29th Street Started on January 2007. Originally expected to be complete in three years, but completed by August 2009, approximately eight months ahead of schedule. The contractor (Kiewit/Sundt Joint Venture) got a $920,000 bonus for finishing early. The bonus was based on a $23,000-per-day incentive (for finishing up to 40 days early).

Crashing Decisions To make decisions concerning crashing requires information about: Time: Regular time and crash time estimates for each activity Cost: Regular cost and crash cost estimates for each activity A list of activities that are on the critical path Critical path activities are potential candidates for crashing Crashing non-critical path activities would not have an impact on overall project duration

Crashing: Procedure General procedure: Crash the project one period at a time Crash only activities on the critical path/s Crash the least expensive activity (that is on the critical path) When there are multiple critical paths, find the sum of crashing the least expensive activity on each critical path If two or more critical paths share common activities, compare the least expensive cost of crashing a common activity shared by critical paths with the sum for the separate critical paths

MIS 373: Basic Operations Management 6 a 4 d 5 c 10 b 9 e 2 f Indirect costs: $1,000 / day (that is, the entire project saves $1000 if it finishes one day earlier, $2000 if it finishes two day earlier, and so on.) Activity Normal time [days] Crash (min) time Available time (crash-normal) Cost to Crash [$/day] a 6 - b 10 8 2 500 c 5 4 1 300 d 3 700 e 9 7 600 f 800 MIS 373: Basic Operations Management

MIS 373: Basic Operations Management 6 a 4 d 5 c 10 b 9 e 2 f 1. Determine Critical Path Path Length a-b-f 18 c-d-e-f 20 (critical path) 2. Rank activities on CP in order of lowest crashing cost Activity Cost per day to crash Available days c 300 1 e 600 2 d 700 3 f 800 1 Activity Normal time [days] Crash (min) time Available time (crash-normal) Cost to Crash [$/day] a 6 - b 10 8 2 500 c 5 4 1 300 d 3 700 e 9 7 600 f 800 MIS 373: Basic Operations Management

MIS 373: Basic Operations Management 2. Rank activities on CP in order of lowest crashing cost Activity Cost per day to crash Available days c 300 1 e 600 2 d 700 3 f 800 1 Crash activity c by 1 day: cost $300 < $1,000 (CP=19 days) (cannot crash c anymore) 6 a 4 d 5 c 10 b 9 e 2 f 4 MIS 373: Basic Operations Management

MIS 373: Basic Operations Management 2. Rank activities on CP in order of lowest crashing cost Activity Cost per day to crash Available days c 300 1 e 600 2 d 700 3 f 800 1 Crash activity e by 1 day: cost $600 < $1,000 (CP=18 days) (may crash activity e by 1 more day) 6 a 4 d 5 c 10 b e 2 f 4 8 9 Both paths are now critical. Have to crash both in order to shorten project. MIS 373: Basic Operations Management

MIS 373: Basic Operations Management 6 a 4 d c 10 b 8 e 2 f Both paths are now critical. Have to crash both in order to shorten project. Remaining activities Path Activity Cost per day to crash Available days a-b-f a - - b 500 2 f 800 1 c-d-e-f c - - e 600 1 d 700 3 Crash activity f (is on both paths) by 1 day: cost = $800 < $1,000 (CP=17 days) MIS 373: Basic Operations Management

MIS 373: Basic Operations Management Remaining activities Path Activity Cost per day to crash Available days a-b-f a - - b 500 2 f 800 1 c-d-e-f c - - e 600 1 d 700 3 Crash activity f (is on both paths) by 1 day: cost $800 < $1,000 (CP=17 days) 6 a 4 d c 10 b 8 e 1 f 2 MIS 373: Basic Operations Management

MIS 373: Basic Operations Management 6 a 4 d c 10 b 8 e 1 f Both paths are still critical. Have to crash both in order to shorten project. Remaining activities Path Activity Cost per day to crash Available days a-b-f a - - b 500 2 f - - c-d-e-f c - - e 600 1 d 700 3 Crash activity b by 1 day: cost $500 AND Crash activity e by 1 day: cost $600 Total cost: $1,100>$1,000 (indirect costs) =>DONE! MIS 373: Basic Operations Management

MIS 373: Basic Operations Management Length after crashing Path\crash n=0 1 2 3 a-b-f 18 18 18 17 c-d-e-f 20 19 18 17 Activity Crashed c e f Cost 0 ($300) ($600) ($800) Savings 0 $1,000 $1,000 $1,000 Total 0 $700 +$400 +$200 = $1,300 MIS 373: Basic Operations Management

Exercise Costs for a project are $12,000 per week for as long as the project lasts. The project manager has supplied the cost and time information shown. Use the information to Determine an optimum crashing plan. Summarize the total costs for the plan.

Solution Determine an optimum crashing plan. Step 1: Compute path lengths and identify the critical path: Step 2: Rank critical activities according to crash costs: Activity b should be shortened one week since it has the lower crashing cost. This would reduce indirect costs by $12,000 at a cost of $3,000, for a net savings of $9,000. 13 2

Solution Determine an optimum crashing plan. Step 3: Rank activities by crashing costs on the two critical paths: At this point, paths a-b and e-f would both have a length of 23 weeks, so both would be critical. Choose one activity (the least costly) on each path to crash: b on a-b and f on e-f, for a total cost of $4,000 + $2,000 = $6,000 and a net savings of $12,000 − $6,000 = $6,000. 13 12 2 1 7

Solution Determine an optimum crashing plan. Step 4: Check to see which path(s) might be critical: a-b and e-f would be 22 weeks in length, and c-d would still be 19 weeks. Step 5: Rank activities on the critical paths: Crash b on path a-b and e on e-f for a cost of $4,000 + $6,000 = $10,000, for a net savings of $12,000 − $10,000 = $2,000. 13 12 11 2 1 14 2 7

Solution Determine an optimum crashing plan. Step 6: Check to see which path(s) might be critical: Paths a-b and e-f would be 21 weeks in length, and c-d would still be 19 weeks. Step 7: At this point, no further improvement is possible: Paths a-b and e-f would be 21 weeks in length, and one activity from each path would have to be shortened. This would mean activity a at $11,000 and e at $6,000 for a total of $17,000, which exceeds the $12,000 potential savings in costs. 13 12 11 2 1 14 2 7

Solution Summarize the total costs for the plan. The following table summarizes the results, showing the length of the project after crashing n weeks: A summary of costs for the preceding schedule would look like this: * Total Cost = Cumulative Crashing Cost + Indirect Cost Crash: b Crash: b, f Crash: b, e No crash

Project Management Software Specialized software used to help manage projects Assign resources Evaluate changes Track performance/schedule Advantages Imposes a methodology Provides logical planning structure Enhances team communication Flag constraint violations Generates reports Enables what-if scenarios Generates various chart types MIS 373: Basic Operations Management

So far over 150 software are listed on Wikipedia “Comparison of project management software” page.

MIS 373: Basic Operations Management Risk Management Risks are an inherent part of project management Risks relate to occurrence of events that have undesirable consequences such as Delays Increased costs Inability to meet technical specifications Good risk management involves Identifying as many risks as possible Analyzing and assessing those risks Working to minimize the probability of their occurrence Establishing contingency plans and budgets for dealing with any that do occur MIS 373: Basic Operations Management

Recap