Project Management

Learning Objectives  Discuss the behavioral aspects of projects in terms of project personnel and the project manager.  Discuss the nature and importance of a work breakdown structure in project management.  Give a general description of PERT/CPM techniques.  Construct simple network diagrams.

Learning Objectives  List the kinds of information that a PERT or CPM analysis can provide.  Analyze networks with deterministic times.  Analyze networks with probabilistic times.  Describe activity “crashing” and solve typical problems.

Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame. Build A A Done Build B B Done Build C C Done Build D Ship JANFEBMARAPRMAYJUN On time! Projects

Project Management  What are the Key Metrics  Time  Cost  Performance objectives  What are the Key Success Factors?  Top-down commitment  Having a capable project manager  Having time to plan  Careful tracking and control  Good communications

Project Management  What are the Major Administrative Issues?  Executive responsibilities  Project selection  Project manager selection  Organizational structure  Organizational alternatives  Manage within functional unit  Assign a coordinator  Use a matrix organization with a project leader

Project Management  What are the tools?  Work breakdown structure  Network diagram  Gantt charts  Risk management

Planning and Scheduling MARAPRMAYJUNJULAUGSEPOCTNOVDEC Locate new facilities Interview staff Hire and train staff Select and order machine Installation / Remodel Move in/startup Gantt Chart

 Deciding which projects to implement  Selecting a project manager  Selecting a project team  Planning and designing the project  Managing and controlling project resources  Deciding if and when a project should be terminated Key Decisions

Project Manager Responsible for: WorkQuality Human ResourcesTime CommunicationsCosts

 Temptation to understate costs  Withhold information  Misleading status reports  Falsifying records  Comprising workers’ safety  Approving substandard work Ethical Issues

Project Life Cycle Concept Feasibility Planning Execution Termination Management

Work Breakdown Structure Project X Level 1 Level 2 Level 3 Level 4

PERT and CPM PERT: Program Evaluation and Review Technique CPM: Critical Path Method  Graphically displays project activities  Estimates how long the project will take  Indicates most critical activities  Show where delays will not affect project

The Network Diagram  Network (precedence) diagram – diagram of project activities that shows sequential relationships by the use of arrows and nodes.  Activity-on-arrow (AOA) – a network diagram convention in which arrows designate activities.  Activity-on-node (AON) – a network diagram convention in which nodes designate activities.  Activities – steps in the project that consume resources and/or time.  Events – the starting and finishing of activities, designated by nodes in the AOA convention.

The Network Diagram (cont’d)  Path  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  Slack  Allowable slippage for path; the difference the length of path and the length of critical path

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

A Comparison of AON and AOA Network Conventions Activity onActivityActivity on Node (AON)MeaningArrow (AOA) C and D cannot begin until A and B have both been completed (d) A B C D B AC D C cannot begin until both A and B are completed; D cannot begin until B is completed. A dummy activity is introduced in AOA (e) CA BD Dummy activity A B C D

A Comparison of AON and AOA Network Conventions Activity onActivityActivity on Node (AON)MeaningArrow (AOA) B and C cannot begin until A is completed. D cannot begin until both B and C are completed. A dummy activity is again introduced in AOA. (f) A C DB AB C D Dummy activity

Project Network – Activity on Arrow Locate facilities Order setup Interview Hire and train Remodel Move in AOA

Project Network – Activity on Node Locate facilities Order setup Interview Remodel Move in 4 Hire and train 7S AON

Time Estimates  Deterministic  Time estimates that are fairly certain  Probabilistic  Estimates of times that allow for variation

 Network activities  ES: earliest start  EF: earliest finish  LS: latest start  LF: latest finish  Used to determine  Expected project duration  Slack time  Critical path Computing Algorithm

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

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

AON Network for Milwaukee Paper A Start B Start Activity Activity A (Build Internal Components) Activity B (Modify Roof and Floor)

AON Network for Milwaukee Paper C D A Start B Activity A Precedes Activity C Activities A and B Precede Activity D

AON Network for Milwaukee Paper G E F H C A Start DB Arrows Show Precedence Relationships

H (Inspect/ Test) 7 Dummy Activity AOA Network for Milwaukee Paper 6 F (Install Controls) E (Build Burner) G (Install Pollution Device) 5 D (Pour Concrete/ Install Frame) 4C (Construct Stack) B (Modify Roof/Floor) A (Build Internal Components)

Determining the Project Schedule Perform a Critical Path Analysis 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

Determining the Project Schedule Perform a Critical Path Analysis A Activity Name or Symbol Earliest Start ES Earliest Finish EF Latest Start LS Latest Finish LF Activity Duration 2

ES/EF Network for Milwaukee Paper (Forward pass) Start 0 0 ES 0 EF = ES + Activity time

ES/EF Network for Milwaukee Paper Start A2A2 2 EF of A = ES of A ES of A

B3B3 ES/EF Network for Milwaukee Paper Start A2A EF of B = ES of B ES of B

C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20

C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20 D4D4 7 3 = Max (2, 3)

D4D4 37 C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20

E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 ES/EF Network for Milwaukee Paper B3B3 03 Start A2A2 20

LS/LF Times for Milwaukee Paper (Backward pass) E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A2 20 LF = EF of Project 1513 LS = LF – Activity time

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

LS/LF Times for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A2 20 LF = Min(4, 10) 42

LS/LF Times for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A

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

Computing Slack Time EarliestEarliestLatestLatestOn StartFinishStartFinishSlackCritical ActivityESEFLSLFLS – ESPath A02020Yes B03141No C24240Yes D37481No E48480Yes F No G Yes H Yes

Critical Path for Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A

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

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

Critical Path Example Perform a Critical Path Analysis ActivityImmediate PredecessorsTime (weeks) A -6 B -7 C A3 D A2 E B4 F B 6 G C, E10 H D, F7

H7H F6F G E4E C3C D2D A6A B7B Start End 21 0

Computing Slack Time EarliestEarliestLatestLatestOn StartFinishStartFinishSlackCritical ActivityESEFLSLFLS – ESPath A06282No B07070Yes C698112No D No E Yes F No G Yes H No

Probabilistic Time Estimates  Optimistic time  Time required under optimal conditions  Pessimistic time  Time required under worst conditions  Most likely time  Most probable length of time that will be required

Probabilistic Estimates Activity start Optimistic time Most likely time (mode) Pessimistic time toto tptp tmtm tete Beta Distribution

Expected Time tete = t o + 4t m +t p 6 t e = expected time t o = optimistic time t m = most likely time t p = pessimistic time

Variance    (t p – t o ) 2 36    = variance t o = optimistic time t p = pessimistic time

Computing Variance MostExpected OptimisticLikelyPessimisticTimeVariance Activity ambt = (a + 4m + b)/6[(b – a)/6] 2 A B C D E F G H

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

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

Probability of Project Completion PERT makes two more assumptions:  Total project completion times follow a normal probability distribution  Activity times are statistically independent

Probability of Project Completion Standard deviation = 1.76 weeks 15 Weeks (Expected Completion Time)

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 lies from the mean

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 lies from the mean

Probability of Project Completion Time Probability (T ≤ 16 weeks) is 71.57% 0.57 Standard deviations 1516 WeeksWeeks

Determining Project Completion Time Probability of 0.01 Z Z = 2.33 Probability of Standard deviations Due date = x 1.76 = 19.1 weeks

PERT Example MostExpected OptimisticLikelyPessimisticTimeVariance Activity ambt = (a + 4m + b)/6[(b – a)/6] 2 A B C D E F G H I J K Immediate Predecessors - C B,D A,E F G C H,I

Time-cost Trade-offs: Crashing  Crash – shortening activity duration  Procedure for crashing  Crash the project one period at a time  Only an activity on the critical path  Crash the least expensive activity  Multiple critical paths: find the sum of crashing the least expensive activity on each critical path

Crashing The Project 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 308,000

Crash and Normal Times and Costs for Activity B ||| 123Time (Weeks) $34,000 $34,000 — $33,000 $33,000 — $32,000 $32,000 — $31,000 $31,000 — $30,000 $30,000 — — Activity Cost CrashNormal Crash Time Normal 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

Critical Path And Slack Times For Milwaukee Paper E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A Slack = 1 Slack = 0 Slack = 6 Slack = 0

Advantages of PERT  Forces managers to organize  Provides graphic display of activities  Identifies  Critical activities  Slack activities

Limitations of PERT  Important activities may be omitted  Precedence relationships may not be correct  Estimates may include a fudge factor  May focus solely on critical path weeks

Goldratt’s Critical Chain  Goldratt’s insight on project management  Time estimates are often pessimistic  Activities finished ahead of schedule often go unreported  With multiple projects, resources needed for one project may be in use on another

 Computer aided design (CAD)  Groupware (Lotus Notes)  CA Super Project  Harvard Total Manager  MS Project  Sure Track Project Manager  Time Line Project Management Software

 Risk: occurrence of events that have undesirable consequences  Delays  Increased costs  Inability to meet specifications  Project termination Project Risk Management

 Identify potential risks  Analyze and assess risks  Work to minimize occurrence of risk  Establish contingency plans Risk Management

Summary  Projects are a unique set of activities  Projects go through life cycles  PERT and CPM are two common techniques  Network diagrams  Project management software available