1. Copyright 2006 John Wiley & Sons, Inc. Project Management OPIM 310

2. Copyright 2006 John Wiley & Sons, Inc.9-2 What is a Project?   Project unique, one-time operational activity or effort   Examples constructing houses, factories, shopping malls, athletic stadiums or arenas developing military weapons systems, aircrafts, new ships launching satellite systems constructing oil pipelines developing and implementing new computer systems planning concert, football games, or basketball tournaments introducing new products into market

3. Copyright 2006 John Wiley & Sons, Inc.9-3 Project Management Process  Project planning  Project scheduling  Project control  Project team made up of individuals from various areas and departments within a company made up of individuals from various areas and departments within a company  Matrix organization a team structure with members from functional areas, depending on skills required a team structure with members from functional areas, depending on skills required  Project Manager most important member of project team most important member of project team

4. Copyright 2006 John Wiley & Sons, Inc.9-4 Project Scope  Scope statement a document that provides an understanding, justification, and expected result of a project a document that provides an understanding, justification, and expected result of a project  Statement of work written description of objectives of a project written description of objectives of a project  Work breakdown structure breaks down a project into components, subcomponents, activities, and tasks breaks down a project into components, subcomponents, activities, and tasks

5. Copyright 2006 John Wiley & Sons, Inc.9-5 Project Scheduling  Steps Define activities Define activities Sequence activities Sequence activities Estimate time Estimate time Develop schedule Develop schedule  Techniques Gantt chart Gantt chart CPM CPM PERT PERT Microsoft Project Microsoft Project

6. Copyright 2006 John Wiley & Sons, Inc.9-6 Gantt Chart   Graph or bar chart with a bar for each project activity that shows passage of time  Provides visual display of project schedule   Slack amount of time an activity can be delayed without delaying the project

7. Copyright 2006 John Wiley & Sons, Inc.9-7 |||||||||| Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work 0246810 MonthMonth 13579135791357913579 Example of Gantt Chart

8. Copyright 2006 John Wiley & Sons, Inc.9-8 Project Control  Time management  Cost management  Quality management  Performance management Earned Value Analysis Earned Value Analysis a standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and measuring schedule and budget variation a standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and measuring schedule and budget variation  Communication  Enterprise project management

9. Copyright 2006 John Wiley & Sons, Inc.9-9 CPM/PERT  Critical Path Method (CPM) DuPont & Remington-Rand (1956) DuPont & Remington-Rand (1956) Deterministic task times Deterministic task times Activity-on-node network construction Activity-on-node network construction  Project Evaluation and Review Technique (PERT) US Navy, Booz, Allen & Hamilton US Navy, Booz, Allen & Hamilton Multiple task time estimates Multiple task time estimates Activity-on-arrow network construction Activity-on-arrow network construction

10. Copyright 2006 John Wiley & Sons, Inc.9-10 Project Network   Activity-on-node (AON) nodes represent activities, and arrows show precedence relationships   Activity-on-arrow (AOA) arrows represent activities and nodes are events for points in time   Event completion or beginning of an activity in a project 1 3 2 Branch Node

11. Copyright 2006 John Wiley & Sons, Inc.9-11 AON Network for House Building Project 1 3 2 2 4 3 3 1 5 1 6 1 7 1Start Design house and obtain financing Order and receive materials Select paint Select carpet Lay foundations Build house Finish work

12. Copyright 2006 John Wiley & Sons, Inc.9-12 1 3 2 2 4 3 3 1 5 1 6 1 7 1Start Critical Path  Critical path Longest path through a network Longest path through a network Minimum project completion time Minimum project completion time A:1-2-4-7 3 + 2 + 3 + 1 = 9 months B:1-2-5-6-7 3 + 2 + 1 + 1 + 1 = 8 months C:1-3-4-7 3 + 1 + 3 + 1 = 8 months D:1-3-5-6-7 3 + 1 + 1 + 1 + 1 = 7 months

13. Copyright 2006 John Wiley & Sons, Inc.9-13 Activity Start Times 1 3 2 2 4 3 3 1 5 1 6 1 7 1 Start Start at 3 months Start at 6 months Start at 5 months Finish at 9 months Finish

14. Copyright 2006 John Wiley & Sons, Inc.9-14 * Critical Path 00 99998888 *7*7 11 77886677 66 11 66775566 55 00 88885555 *4*4 114455334433 00 55553333 *2*2 00 33330000 *1*1 Slack S EF LF ES LS Activity Activity Slack

15. Copyright 2006 John Wiley & Sons, Inc.9-15 Probabilistic Time Estimates   Beta distribution a probability distribution traditionally used in CPM/PERT a = optimistic estimate m = most likely time estimate b = pessimistic time estimate where Mean (expected time): t = a + 4 m + b 6 Variance:  2 = b - a 6 2

16. Copyright 2006 John Wiley & Sons, Inc.9-16 Examples of Beta Distributions P(time) Time amtbamtb m = t Time Time ba

17. Copyright 2006 John Wiley & Sons, Inc.9-17 Project Network with Probabilistic Time Estimates: Example StartFinish 2 3,6,9 3 1,3,5 1 6,8,10 5 2,3,4 6 3,4,5 4 2,4,12 7 2,2,2 8 3,7,11 9 2,4,6 10 1,4,7 11 1,10,13 Equipment installation System development Position recruiting Equipment testing and modification Manual testing Job Training Orientation System training System testing Final debugging System changeover

18. Copyright 2006 John Wiley & Sons, Inc.9-18 Activity Time Estimates 1 681080.44 1 681080.44 236961.00 236961.00 313530.44 313530.44 4 241252.78 4 241252.78 5 23430.11 5 23430.11 634540.11 634540.11 722220.00 722220.00 8371171.78 8371171.78 924640.44 924640.44 1014741.00 111101394.00 TIME ESTIMATES (WKS)MEAN TIMEVARIANCE ACTIVITY ambt б 2

19. Copyright 2006 John Wiley & Sons, Inc.9-19 Activity Early, Late Times, and Slack ACTIVITY t б  ESEFLSLFS 180.4408191 180.4408191 261.0006060 261.0006060 330.4403252 330.4403252 4 52.7881316218 4 52.7881316218 5 30.1169690 5 30.1169690 640.1137592 640.1137592 720.0035141611 720.0035141611 871.789169160 871.789169160 940.4491312163 940.4491312163 1041.00131721258 1194.00162516250

20. Copyright 2006 John Wiley & Sons, Inc.9-20  2 = б 2 2 + б 5 2 + б 8 2 + б 11 2  = 1.00 + 0.11 + 1.78 + 4.00 = 6.89 weeks Total project variance

21. Copyright 2006 John Wiley & Sons, Inc.9-21 Probabilistic Network Analysis Determine probability that project is completed within specified time where  = t p = project mean time  =project standard deviation x =proposed project time Z =number of standard deviations x is from mean Z =Z =Z =Z = x -  

22. Copyright 2006 John Wiley & Sons, Inc.9-22 Normal Distribution Of Project Time  = t p Timex ZZ Probability

23. Copyright 2006 John Wiley & Sons, Inc.9-23 Southern Textile Example What is the probability that the project is completed within 30 weeks?  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = 1.91 x -   30 - 25 2.62 From Table A.1, (appendix A) a Z score of 1.91 corresponds to a probability of 0.4719. Thus P(30) = 0.4719 + 0.5000 = 0.9719  = 25 Time (weeks) x = 30 P( x  30 weeks)

24. Copyright 2006 John Wiley & Sons, Inc.9-24 Southern Textile Example  = 25 Time (weeks) x = 22 P( x  22 weeks) What is the probability that the project is completed within 22 weeks?  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = -1.14 x -   22 - 25 2.62 From Table A.1 (appendix A) a Z score of -1.14 corresponds to a probability of 0.3729. Thus P(22) = 0.5000 - 0.3729 = 0.1271

25. Copyright 2006 John Wiley & Sons, Inc.9-25 Project Crashing   Crashing reducing project time by expending additional resources   Crash time an amount of time an activity is reduced   Crash cost cost of reducing activity time  Goal reduce project duration at minimum cost

26. Copyright 2006 John Wiley & Sons, Inc.9-26 1 12 2 8 4 3 4 5 4 6 4 7 4 Project Crashing: Example

27. Copyright 2006 John Wiley & Sons, Inc.9-27 Project Crashing: Example (cont.) $7,000 – $6,000 – $5,000 – $4,000 – $3,000 – $2,000 – $1,000 – – ||||||| 02468101214Weeks Normal activity Normal time Normal cost Crash time Crashed activity Crash cost Slope = crash cost per week

28. Copyright 2006 John Wiley & Sons, Inc.9-28 Normal Activity and Crash Data TOTAL NORMALCRASHALLOWABLECRASH TIMETIMENORMALCRASHCRASH TIMECOST PER ACTIVITY(WEEKS)(WEEKS)COSTCOST(WEEKS)WEEK 1127$3,000$5,0005$400 2852,0003,5003500 3434,0007,00013,000 412950,00071,00037,000 5415001,1003200 6415001,1003200 74315,00022,00017,000 $75,000$110,700

29. Copyright 2006 John Wiley & Sons, Inc.9-29 1 12 2 8 3 4 5 4 6 4 7 4 $400 $500 $3000 $7000 $200 $700 12 4 Project Duration: 36 weeks FROM … 1 7 2 8 3 4 5 4 6 4 7 4 $400 $500 $3000 $7000 $200 $700 12 4 Project Duration: 31 weeks Additional Cost: $2000 TO…

30. Copyright 2006 John Wiley & Sons, Inc.9-30  Crashing costs increase as project duration decreases  Indirect costs increase as project duration increases  Reduce project length as long as crashing costs are less than indirect costs Time-Cost Relationship

31. Copyright 2006 John Wiley & Sons, Inc.9-31 Time-Cost Tradeoff Cost ($) Project duration CrashingTime Minimum cost = optimal project time Total project cost Indirect cost Direct cost