3 Project Management PowerPoint presentation to accompany Heizer and Render Operations Management, Eleventh Edition Principles of Operations Management, Ninth Edition PowerPoint slides by Jeff Heyl © 2014 Pearson Education, Inc.

Outline The Importance of Project Management Project Planning Project Scheduling Project Controlling Project Management Techniques: PERT A Critique of PERT

MANAGEMENT OF PROJECTS

Importance of Project Management Project: unique, one-time operations designed to accomplish a set of objectives in a limited time frame. Building Construction Research Project

Importance of Project Management Planning - goal setting, defining the project, team organization Scheduling - relate people, money, and supplies to specific activities and activities to each other Controlling - monitor resources, costs, quality, and budgets; revise plans and shift resources to meet time and cost demands Planning Scheduling Controlling

Project Planning Establishing objectives Defining project Creating work breakdown structure Determining resources Forming organization

Project Planning Project Organization Often temporary structure Uses specialists from entire company Headed by project manager Coordinates activities Monitors schedule and costs Permanent structure called ‘matrix organization’

Project Planning A Sample Project Organization Project No. 1 Marketing Finance Human Resources Design Quality Mgt Production President Test Engineer Mechanical Project No. 1 Project Manager Technician Technician Project No. 2 Project Manager Electrical Engineer Computer Engineer Figure 3.2

Project Planning Matrix Organization Marketing Operations Engineering Finance Project 1 Project 2 Project 3 Project 4

Project Planning The Role of Project Manager: All necessary activities are finished in order and on time The project comes in within budget The project meets quality goals The people assigned to the project receive motivation, direction, and information

Project Planning The Role of Project Manager: All necessary activities are finished in order and on time The project comes in within budget The project meets quality goals The people assigned to the project receive motivation, direction, and information Project managers should be: Good coaches Good communicators Able to organize activities from a variety of disciplines

Project Planning Work Breakdown Structure Dividing a project into more and more detailed tasks (or activities) Level 1. Project 2. Major tasks in the project 3. Subtasks in the major tasks 4. Activities (or “work packages”) to be completed

Work Breakdown Structure Level 1 Develop Windows 8 Operating System 1.0 Level 2 Software Design Cost Management Plan System Testing 1.1 1.2 1.3 Level 3 Develop GUIs Design Cost Tracking Reports Module Testing Ensure Compatibility with Earlier Versions Develop Cost/Schedule Interface Defect Testing 1.1.1 1.2.2 1.3.2 1.3.1 1.2.1 1.1.2 Level 4 Compatible with Windows 7 Compatible with Windows Vista Compatible with Windows XP 1.1.2.3 1.1.2.2 1.1.2.1 (Work packages) Figure 3.3

Project Scheduling Shows the relationship of each activity to others and to the whole project Identifies the precedence relationships among activities Encourages the setting of realistic time and cost estimates for each activity Helps make better use of people, money, and material resources by identifying critical bottlenecks in the project

Project Scheduling Techniques Gantt chart Critical Path Method (CPM) Program Evaluation and Review Technique (PERT)

A Simple Gantt Chart Project : establish a new department Activity Time Activity Sequence Project Duration

Project Controlling Close monitoring of resources, costs, quality, budgets Feedback enables revising the project plan and shift resources Computerized tools produce extensive reports

Project Management Software There are several popular packages for managing projects Primavera MacProject MindView HP Project Fast Track Microsoft Project © 2014 Pearson Education, Inc.

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

PROJECT MGMT TECHNIQUES: PERT

PERT and CPM Network techniques Developed in 1950s 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

Six Steps PERT Define the project and prepare the work breakdown structure Develop relationships among the activities - decide which activities must precede and which must follow others Draw the network connecting all of the activities

Six Steps PERT Assign time and/or cost estimates to each activity Compute the longest time path through the network – this is called the critical path Use the network to help plan, schedule, monitor, and control the project

PERT: AON Convention Activity on Activity Node (AON) Meaning (a) A B C A comes before B, which comes before C (a) A B C 3.0 2.5 2.0 A and B must both be completed before C can start (b) A C B 3.0 2.5 2.0

PERT: AON Convention Activity on Activity Node (AON) Meaning (c) B A C B and C cannot begin until A is completed (c) B A C 3.0 2.5 2.0 C and D cannot begin until A and B have both been completed (d) A B C D 3.0 2.5 2.0 3.5

PERT: AON Convention Activity on Activity Node (AON) Meaning (e) A B C C cannot begin until both A and B are completed; D cannot begin until B is completed. (e) A B C D 3.0 2.5 2.0 3.5 B and C cannot begin until A is completed. D cannot begin until both B and C are completed. (f) A C D B 3.0 2.5 3.5 2.0

AON Example Example 3.1: Milwaukee has identified the eight activities that need to be performed in order to install air pollution control equipment in its facility. Activity Description Immediate Predecessors Estimated Time (weeks) A Build internal components — 2 B Modify roof and floor 3 C Construct collection stack D Pour concrete and install frame A, B 4 E Build high-temperature burner F Install pollution control system G Install air pollution device D, E 5 H Inspect and test F, G

Immediate Predecessors Estimated Time (weeks) Activity Immediate Predecessors Estimated Time (weeks) A — 2 B 3 C D A, B 4 E F G D, E 5 H F, G 4 3 2 5 C F H E A B Start D G

EX1 in class Estimated Time Immediate Task (weeks) predecessor Construct a PERT network for this project by using AON convention A 8 — B 6 A C 4 — D 9 C E 11 A F 3 B, E G 1 B, C, E H 5 D, F, G

PERT Important concepts Path: A sequence of activities leading from the beginning node to the ending node of a PERT network. Path length: The sum of the time estimates of the activities on a path. Critical path: The longest path in a PERT network. Critical activities: The activities on the critical path. Project duration (or completion time): The length of the critical path. Path slack: The difference between the length of a path and the project duration.

PERT Analysis Deterministic PERT Analysis Computational Algorithm

Deterministic PERT Analysis Enumeration method Calculate and compare the lengths of all paths Determine the critical path, critical activities, and the path slacks

Deterministic PERT Analysis Example 3.2: Do deterministic PERT analysis. Estimated Time Immediate Task (weeks) predecessor A 8 — B 6 A C 4 — D 9 C E 11 A F 3 B G 1 D, E, F G F B E D A C Start 9 4 6 11 1 8 3 Total 42

Deterministic PERT Analysis G F B E D A C Start 9 4 6 11 1 8 3 (1) What is the critical path? What are the critical activities? (2) What is the duration of the project? Are there any path slacks? If so, how long is each of the slacks? Critical Path Path Length (weeks) Slack Start – A – B – F – G 8+6+3+1=18 2 Start – A – E – G 8+11+1=20 Start – C – D – G 4+9+1=14 6 (1) The critical path is Start – A – E - G. The critical activities are A, E, G. (2) The duration of the project is 20 weeks. Path Start – A – B – F – G has a slack of 2 weeks, and path Start – C – D – G has a slack of 6 weeks.

Deterministic PERT 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

Deterministic PERT Analysis Example 3.3 (1) What is the critical path? What are the critical activities? (2) What is the duration of the project? Are there any path slacks? If so, how long is each of the slacks? Path Length (weeks) Slack Critical Path Start – A – C – F – H 9 6 Start – A – C – E – G – H 15 0 Start – A – D – G – H 13 2 Start – B – D – G – H 14 1 (1) The critical path is Start – A – C – E – G – H. The critical activities are A, C, E, G, H. (2) The duration of the project is 15 weeks. (3) Path Start – A – C – F – H has a slack of 6 weeks, path Start – A – D – G – H has a slack of 2 weeks, and path Start – B – D – G – H has a slack of 1 week.

Immediate Predecessor(s) Estimated Time (weeks) EX2 in class Activity Immediate Predecessor(s) Estimated Time (weeks) J -- 10 K 8 L 6 M 3 N K, M 5 O 7 P L, N Draw the diagram by using the information above, and determine the project duration, critical activity and path slacks

PERT Computational Algorithm 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 ES EF LS LF

PERT: Forward Pass Begin at starting event and work forward Earliest Start Time Rule: If an activity has only one 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)

PERT: 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

PERT: Forward Pass (Example 3.4) Step 1: Use forward pass to calculate ES and EF ES EF LS LF 2 4 4 7 3 2 2 F C 2 4 8 A 4 2 E H Start 13 15 5 3 4 B D G 3 3 7 8 13

PERT: 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)

PERT: 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

PERT: Backward Pass (Example 3.4) Step 2: Use backward pass to calculate LS and LF ES EF LS LF 2 4 4 7 2 4 10 13 3 2 2 F 2 C 2 A 4 8 4 2 4 8 E H Start 13 15 5 3 4 13 15 B D G 3 3 7 8 13 1 4 4 8 8 13

PERT: Slack time & Critical activity After computing the ES, EF, LS, and LF times for all activities, compute the slack time for each activity, and identify the critical activity. Slack is the length of time an activity can be delayed without delaying the entire project Slack = LS – ES = LF – EF Critical activity is an activity with zero slack

PERT: Critical activity & Project duration Noncritical activity is an activity with a positive slack Project duration is the time to finish the whole project. Project duration = LF of ending activity = EF of ending activity

PERT: Critical Activity (Example 3.4) Step 3: Calculate activity slack and decide critical activities & project duration Slack = 0 Slack = 6 2 4 4 7 Slack = 0 2 4 10 13 3 2 2 F C Slack = 0 2 2 A 4 8 4 2 4 8 E H Start Slack = 0 13 15 5 3 4 13 15 B D G Slack = 0 3 3 7 8 13 1 4 4 8 8 13 Slack = 1 Slack = 1 Slack = 0

PERT: Critical Activity (Example 3.4) Critical activities: A, C, E, G, H Slack = 0 Slack = 6 Project duration is 15 weeks. 2 4 4 7 Slack = 0 2 4 10 13 3 2 2 F C Slack = 0 2 2 A 4 8 4 2 4 8 E H Start Slack = 0 13 15 5 3 4 13 15 B D G Slack = 0 3 3 7 8 13 1 4 4 8 8 13 Slack = 1 Slack = 1 Slack = 0

Note Activity slack time: Path slack time: PERT Algorithm Example 3.4 Deterministic PERT Analysis Example 3.3, 3.2

PERT: Computational Algorithm (Example 3.5) (1) Construct a PERT network for this project by using AON convention Activity Immediate Predecessors Estimated Time (weeks) A — 7 B 3 C 9 D A, C 5 E 2 F Dummy Ending Activity Dummy Starting Activity 9 3 2 5 7 A B D E Start End C F

PERT: Example 3.5 Step 1: Use forward pass to calculate ES and EF A D LS LF 7 12 17 17 19 7 5 2 A D E 19 19 Start End 3 9 5 B C F 3 3 12 12 17

PERT: Example 3.5 Step 2: Use backward pass to calculate LS and LF A D EF LS LF 7 12 17 17 19 5 12 12 17 17 19 7 5 2 A D E 19 19 19 19 Start End 3 9 5 B C F 3 3 12 12 17 3 3 12 14 19

PERT: Example 3.5 Step 3: Calculate activity slack and decide critical activities & project duration Slack = 5 Slack = 0 Slack = 0 7 12 17 17 19 Slack = 0 5 12 12 17 17 19 7 5 2 Slack = 0 A D E 19 19 19 19 Start End 3 9 5 B C F 3 3 12 12 17 3 3 12 14 19 Slack = 0 Slack = 0 Slack = 2

PERT: Example 3.5 Critical activities are B, C, D, E. Slack = 5 Slack = 0 Slack = 0 7 12 17 17 19 Slack = 0 5 12 12 17 17 19 7 5 2 Slack = 0 A D E 19 19 19 19 Start End 3 9 5 B C F 3 3 12 12 17 3 3 12 14 19 Slack = 0 Slack = 0 Slack = 2 Critical activities are B, C, D, E. Project duration is 19 weeks.

EX3 in class Use the computational algorithm to determine the critical activities & project duration 10 6 8 J L P 3 5 End M N Start 8 7 K O

Advantages of PERT/CPM Especially useful when scheduling and controlling large projects Straightforward concept and not mathematically complex Graphical networks help highlight relationships among project activities Critical path and slack time analyses help pinpoint activities that need to be closely watched

Advantages of PERT/CPM Project documentation and graphics point out who is responsible for various activities Applicable to a wide variety of projects Useful in monitoring not only schedules but costs as well

Limitations of PERT/CPM Project activities have to be clearly defined, independent, and stable in their relationships Precedence relationships must be specified and networked together Time estimates tend to be subjective and are subject to fudging by managers There is an inherent danger of too much emphasis being placed on the longest, or critical, path