0 Production and Operations Management Norman Gaither Greg Frazier Slides Prepared by John Loucks  1999 South-Western College Publishing

1 Chapter 19 Planning and Controlling Projects

2 OverviewOverview l Characteristics of a Project l Project Management l Project-Planning and Control Techniques l Computer Software for Project Management l An Evaluation of CPM/PERT l Wrap-Up: What World-Class Producers Do

3 Characteristics of a Project l A unique, one-time effort l Requires the completion of a large number of interrelated activities l Resources, such as time and/or money, are limited l Typically has its own management structure

4 Project Management l Project manager is appointed to head the project management team l Team members are drawn from various departments and are temporarily assigned to the project l Team is responsible for the planning, scheduling and controlling the project to its completion

5 Project Team ProjectPlanProjectPlan ManagementInformationSystemManagementInformationSystem ProjectScheduleProjectSchedule ProjectManagerProjectTeam Resources:InternalMarketingEngineeringProductionMaterials Quality Assur. HRAccounting ExternalSuppliersSubcontract.

6 Project-Planning and Control Techniques l Planning inputs l Tools l Scheduling and control charts l Horizontal bar charts l Expenditure charts and graphs l Personnel charts l Materials milestone charts l Critical path method (CPM) l Program evaluation and review technique (PERT)

7 Planning Inputs l Resource Availability and/or Limits l Due date, late penalties, early completion incentives l Budget l Activity Information l Identify all required activities l Estimate the resources required (time) to complete each activity l Immediate predecessor(s) to each activity needed to create interrelationships

8 Scheduling and Control Charts l Horizontal Bar Charts l A version of the Gantt chart l Used to plan and schedule activities l As the project progresses, the status of activities is plotted on the chart, compared to the plan, and, if necessary, corrective action is taken l more

9 Scheduling and Control Charts l Horizontal Bar Charts (continued) l Advantages l Easy to understand l Easy to modify and update l Low cost l Disadvantages l Cumbersome for large project l Must be keep up to date l Does not indicate the relationships among the activities

1010 Critical Path Method (CPM) l Designed to provide intense micro-control l The system is dynamic; it continues to provide periodic reports as the project progresses

1 Manager’s View of CPM List of project activities List of project activities Precedence relationship among activities Precedence relationship among activities Estimate of each activity’s duration Estimate of each activity’s duration Estimated duration of project Estimated duration of project Identification of critical activities Identification of critical activities Amount of slack for each activity Amount of slack for each activity CPM processing procedures

1212 CPM Terminology l Activity l A task or a certain amount of work required in the project l Requires time to complete l Represented by an arrow l Dummy Activity l Indicates only precedence relationships l Does not require any time of effort

1313 CPM Terminology l Event l Signals the beginning or ending of an activity l Designates a point in time l Represented by a circle (node) l Network l Shows the sequential relationships among activities using nodes and arrows

1414 CPM Terminology l Path l A connected sequence of activities leading from the starting event to the ending event l Critical Path l The longest path (time); determines the project duration l Critical Activities l All of the activities that make up the critical path

1515 CPM Terminology l Earliest Start (ES) l The earliest that an activity can begin; assumes all preceding activities have been completed l Earliest Finish (EF) l ES + activity time l Latest Finish (LF) l The latest that an activity can finish and not change the project completion time l Latest Start (LS) l LF - activity time

1616 Steps in CPM Analysis l Draw the CPM network l A graphic view of the relationships among the required activities l Analyze the paths through the network l Determine the length of each path (time required to complete each path) l Starting at the beginning of the network and working toward the end (from left to right), determine the ES and EF for each activity l... more

1717 Steps in CPM Analysis l Path analysis (continued) l Identify the critical path(s) (the longest path[s] through the network) l The critical path(s) determines how long the project will take l... more

1818 Steps in CPM Analysis l Determine the slack for each activity l Working from the end of the project network (from right to left), find the LF and the LS for each activity l Compute the activity’s slack slack = LS - ES = LF - EF slack = LS - ES = LF - EF l Slack is the maximum amount of time that this activity can be delay in its completion before it becomes a critical activity, i.e., delays completion of the project

1919 CPM Example: Problem 6, Page 729 l CPM Network a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j, 12

2020 CPM Example l ES and EF Times a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j,

2121 CPM Example l ES and EF Times a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j,

2 CPM Example l ES and EF Times a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j, Project’s EF = 33 Project’s EF = 33

2323 CPM Example l LS and LF Times a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j,

2424 CPM Example l LS and LF Times a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j,

2525 CPM Example l Slack a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j,

2626 CPM Example l Critical Path a, 6 f, 15 b, 8 c, 5 e, 9 d, 13 g, 17 h, 9 i, 6 j, 12

2727 Program Evaluation and Review Technique (PERT) l PERT is based on the assumption that an activity’s duration follows a probability distribution instead of being a single value. l The probabilistic information about the activities is translated into probabilistic information about the project.

2828 PERTPERT l Three time estimates are required to compute the parameters of an activity’s duration distribution: l pessimistic time (t p ) - the time the activity would take if things did not go well l most likely time (t m ) - the consensus best estimate of the activity’s duration l optimistic time (t o ) - the time the activity would take if things did go well l... more

2929 PERTPERT l From these three time estimates about an activity, two probability distribution parameters are calculated: the mean (t e ) and the variance (V t ). t e = ( t o + 4t m + t p ) / 6 t e = ( t o + 4t m + t p ) / 6 V t = [ ( t p - t o ) / 6 ] 2 V t = [ ( t p - t o ) / 6 ] 2

3030 Steps in PERT Analysis l Draw the network. l Analyze the paths through the network and find the critical path. l The length of the critical path is the mean of the project duration probability distribution which is assumed to be normal. l... more

3131 Steps in PERT Analysis l The standard deviation of the project duration probability distribution is computed by adding the variances of the critical activities (all of the activities that make up the critical path) and taking the square root of that sum l Probability computations can now be made using the normal distribution table.

3232 PERT Example Immed. Optimistic Most Likely Pessimistic Immed. Optimistic Most Likely Pessimistic Activity Predec. Time (Hr.) Time (Hr.) Time (Hr.) A B C A D A D A E A E A F B,C F B,C G B,C G B,C H E,F H E,F I E,F I E,F J D,H J D,H K G,I K G,I 3 5 7

3 PERT Example l PERT Network A D C B F E G I H K J

3434 PERT Example l Activity Expected Time and Variance Activity Expected Time Variance Activity Expected Time Variance A 6 4/9 A 6 4/9 B 4 4/9 B 4 4/9 C 3 0 C 3 0 D 5 1/9 D 5 1/9 E 1 1/36 E 1 1/36 F 4 1/9 F 4 1/9 G 2 4/9 G 2 4/9 H 6 1/9 H 6 1/9 I 5 1 I 5 1 J 3 1/9 J 3 1/9 K 5 4/9 K 5 4/9

3535 PERT Example l Earliest/Latest Times Activity ES EF LS LF Slack Activity ES EF LS LF Slack A *critical B B C * C * D D E E F * F * G G H H I * I * J J K * K *

3636 PERT Example l Probability the project will be completed within 24 hours V path = V A + V C + V F + V I + V K = 4/ / /9 = 4/ / /9 = 2 = 2  path = z = ( )/  (24-23)/1.414 =.71 z = ( )/  (24-23)/1.414 =.71 From the Standard Normal Distribution table: From the Standard Normal Distribution table: P(z <.71) = =.7612 P(z <.71) = =.7612

3737 Activity Cost-Time Tradeoffs l Project managers may have the option or requirement to crash the project, or accelerate the completion of the project. l This is accomplished by reducing the length of the critical path(s). l The length of the critical path is reduced by reducing the duration of the activities on the critical path. l... more

3838 Cost-Time Tradeoffs l If each activity requires the expenditure of an amount of money to reduce its duration by one unit of time, then the project manager selects the least cost critical activity, reduces it by one time unit, and traces that change through the remainder of the network. l... more

3939 Cost-Time Tradeoffs l As a result of a reduction in an activity’s time, a new critical path may be created. l When there is more than one critical path, each of the critical paths must be reduced. l If the length of the project needs to be reduced further, the process is repeated.

4040 Computer Software for Project Management l Microsoft Project (Microsoft Corp.) l MacProject (Claris Corp.) l PowerProject (ASTA Development Inc.) l Primavera Project Planner (Primavera) l Project Scheduler (Scitor Corp.) l Project Workbench (ABT Corp.) l SuperProject (Computer Associates International) l TurboProject (IMSI)

4141 Evaluation of CPM/PERT l Activities are assumed to be independent. l A precise breaking point where one activity ends and another begins is also assumed. l Initially-critical activities might not receive the attention they deserve until it is too late. l Activity time estimates might be biased. l The cost of CPM/PERT might not be justified by the value of the information it provides. l Employees might not understand the statistical underpinnings of PERT.

4242 Wrap-Up: World-Class Practice l Project organizations are flexible enough to respond aggressively to business opportunities. l Personnel are selected and trained to be flexible in moving from department to department and project to project as needed. l Scheduling and control charts are frequently used because of their simplicity, flexibility, low cost, and effectiveness as communication devices. l CPM, PERT, and PERT/Cost are also used to provide computerized activity-by-activity planning and control.

4343 End of Chapter 19