McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. 17 Project Management

17-2 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.

17-3 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.

17-4 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

17-5 Project Management  How is it different?  Limited time frame  Narrow focus, specific objectives  Less bureaucratic  Why is it used?  Special needs  Pressures for new or improves products or services

17-6 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

17-7 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

17-8 Project Management  What are the tools?  Work breakdown structure  Network diagram  Gantt charts  Risk management

17-9 Planning and Scheduling MARAPRMAYJUNJULAUGSEPOCTNOVDEC Locate new facilities Interview staff Hire and train staff Select and order furniture Remodel and install phones Move in/startup Gantt Chart

17-10  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

17-11 Project Manager Responsible for: WorkQuality Human ResourcesTime CommunicationsCosts

17-12  Temptation to understate costs  Withhold information  Misleading status reports  Falsifying records  Comprising workers’ safety  Approving substandard work Ethical Issues

17-13 Project Life Cycle Concept Feasibility Planning Execution Termination Management

17-14 Work Breakdown Structure Project X Level 1 Level 2 Level 3 Level 4 Figure 17.2

17-15 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

17-16 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.

17-17 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

17-18 Project Network – Activity on Arrow Locate facilities Order furniture Furniture setup Interview Hire and train Remodel Move in Figure 17.4 AOA

17-19 Project Network – Activity on Node Locate facilities Order furniture Furniture setup Interview Remodel Move in 4 Hire and train 7S Figure 17.4 AON

17-20 Network Conventions a b ca b c a b c d a b c Dummy activity

17-21 Time Estimates  Deterministic  Time estimates that are fairly certain  Probabilistic  Estimates of times that allow for variation

17-22 Example weeks 6 weeks 3 weeks 4 weeks 9 weeks 11 weeks 1 week Locate facilities Order furniture Furniture setup Interview Hire and train Remodel Move in Deterministic time estimates Figure 17.5

17-23 Example 1 Solution Critical Path

17-24  Network activities  ES: early start  EF: early finish  LS: late start  LF: late finish  Used to determine  Expected project duration  Slack time  Critical path Computing Algorithm

17-25 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

17-26 Probabilistic Estimates Activity start Optimistic time Most likely time (mode) Pessimistic time toto tptp tmtm tete Figure 17.8 Beta Distribution

17-27 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

17-28 Variance    (t p – t o ) 2 36    = variance t o = optimistic time t p = pessimistic time

17-29 Example a d e f b h g i c Optimistic time Most likely time Pessimistic time

17-30 Example 5 Time Estimates 2.83 a 4.00 d 5.0 e 7.0 f 4.00 b 6.0 h 3.33 g 4.17 i 3.17 c T abc = 10.0 T def = 16.0 T ghi = 13.50

17-31 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.

Weeks a-b-c d-e-f g-h-i Example 6

17-33 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

17-34 Time-Cost Trade-Offs: Crashing Total cost Shorten Cumulative cost of crashing Expected indirect costs Optimum CRASH Figure 17.11

a6a 4d4d 5c5c 10 b 9e9e 2f2f Example 7

17-36 Advantages of PERT  Forces managers to organize  Provides graphic display of activities  Identifies  Critical activities  Slack activities

17-37 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

17-38 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

17-39  Computer aided design (CAD)  Groupware (Lotus Notes)  CA Super Project  Harvard Total Manager  MS Project  Sure Track Project Manager  Time Line Project Management Software

17-40  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 Advantages of PM Software

17-41  Risk: occurrence of events that have undesirable consequences  Delays  Increased costs  Inability to meet specifications  Project termination Project Risk Management

17-42  Identify potential risks  Analyze and assess risks  Work to minimize occurrence of risk  Establish contingency plans Risk Management

17-43 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

17-44 Video: Work Breakdown

17-45 Video: Project Materials/Delays

17-46 Video: Project Scheduling

17-47 Video: PERT/CPM