Operations Management William J. Stevenson 8th edition

17 Project Management CHAPTER Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

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

Project Management How is it different? Why is it used? Limited time frame Narrow focus, specific objectives Less bureaucratic Why is it used? Special needs Pressures for new or improves products or services

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 MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Locate new facilities Interview staff Hire and train staff Select and order furniture Remodel and install phones Move in/startup Gantt Chart

Key Decisions 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

Project Manager Responsible for: Work Quality Human Resources Time Communications Costs

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

Project Life Cycle Concept Feasibility Planning Execution Termination Management

Work Breakdown Structure Figure 17.2 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 Activity-on-arrow (AOA) Activity-on-node (AON) Activities Events

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

Project Network – Activity on Arrow Figure 17.4 1 2 3 4 5 6 Locate facilities Order furniture Furniture setup Interview Hire and train Remodel Move in AOA

Project Network – Activity on Node Figure 17.4 1 2 3 5 6 Locate facilities Order furniture Furniture setup Interview Remodel Move in 4 Hire and train 7 S AON

Network Conventions a b c d Dummy activity

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

Example 1 Figure 17.5 1 2 3 4 5 6 Deterministic time estimates 6 weeks Locate facilities Order furniture Furniture setup Interview Hire and train Remodel Move in Deterministic time estimates

Example 1 Solution Critical Path

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

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 Figure 17.8 Activity start Optimistic time Most likely time (mode) Pessimistic time to tp tm te

te = to + 4tm +tp 6 Expected Time te = expected time to = optimistic time tm = most likely time tp = pessimistic time

(tp – to)2 2 = 36 Variance 2 = variance to = optimistic time 2 = (tp – to)2 36 2 = variance to = optimistic time tp = pessimistic time

Example 5 1-3-4 a 3-4-5 d 3-5-7 e 5-7-9 f 2-4-6 b 4-6-8 h 2-3-6 g 3-4-6 i 2-3-5 c Optimistic time Most likely Pessimistic

Path Probabilities Z = Specified time – Path mean Path standard deviation Z indicates how many standard deviations of the path distribution the specified tine is beyond the expected path duration.

Example 6 17 Weeks 10.0 16.0 13.5 1.00 a-b-c d-e-f g-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

Time-Cost Trade-Offs: Crashing Figure 17.11 Total cost Shorten Cumulative cost of crashing Expected indirect costs Optimum CRASH

Example 7 6 a 4 d 5 c 10 b 9 e 2 f

Advantages of PERT Forces managers to organize Provides graphic display of activities Identifies Critical activities Slack activities 1 2 3 4 5 6

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 1 2 3 4 5 6 142 weeks

Technology for Managing Projects Computer aided design (CAD) Groupware (Lotus Notes) Project management software CA Super Project Harvard Total Manager MS Project Sure Track Project Manager Time Line

Advantages of PM Software Imposes a methodology Provides logical planning structure Enhances team communication Flag constraint violations Automatic report formats Multiple levels of reports Enables what-if scenarios Generates various chart types

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

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

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

CHAPTER 17 Additional PowerPoint slides contributed by Geoff Willis, University of Central Oklahoma.

Project Crashing Crashing a project involves paying more money to complete a project more quickly. Since the critical path determines the length of a project, it makes sense to reduce the length of activities on the critical path. CP activities should be reduced until the project is reduced to the desired length or you are paying more per day than you save. If you have multiple CPs, they should be shortened simultaneously.

Definition/Example Alton Bridge Projects — Concepts PM1 Definition/Example Alton Bridge