1. Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Project Management Operations Management - 5 th Edition Chapter 9 Roberta Russell & Bernard W. Taylor, III

2. Copyright 2006 John Wiley & Sons, Inc.9-2 Lecture Outline   Project Planning   Project Scheduling   Project Control   CPM/PERT   Probabilistic Activity Times   Project Crashing and Time-Cost Trade-off

3. Copyright 2006 John Wiley & Sons, Inc.9-3 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

4. Copyright 2006 John Wiley & Sons, Inc.9-4 Hallmarks of a project A project is unique/non-repetitive. A project has a specific beginning, goal, purpose, and end. Thus a project is also temporary. Projects must be give specific resources. Projects usually cross functional lines and are organized as a matrix. Projects are for use by others: the usufructuary and the user. Projects generate systemic conflict. Projects are “open veins” from which the entity loses blood and where infection enter.

5. Copyright 2006 John Wiley & Sons, Inc.9-5 Project Elements  Objective  Scope  Contract requirements  Schedules  Resources  Personnel  Control  Risk and problem analysis

6. Copyright 2006 John Wiley & Sons, Inc.9-6 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

7. Copyright 2006 John Wiley & Sons, Inc.9-7 Functional Managers vs. Project Managers SSSSpecialist EEEExpert RRRRelay on analytical approach PPPProcess oriented FFFFocusing on how GGGGeneralist FFFFacilitator RRRRelying on systems approach RRRResult oriented FFFFocusing on what and when

8. Copyright 2006 John Wiley & Sons, Inc.9-8 Skill Requirements for Project Managers  Team building  Leadership  Conflict resolution  Technical expertise  Planning  Organization  Entrepreneurship  Administration  Management support  Resource allocation

9. Copyright 2006 John Wiley & Sons, Inc.9-9 Project Manager’s Bases of Influence  Authority The right to issue orders The right to issue orders  Assignment Ability to influence a worker’s later assignment Ability to influence a worker’s later assignment  Budget Ability to authorize others’ use of fund Ability to authorize others’ use of fund  Promotion Ability to improve a worker’s position Ability to improve a worker’s position  Money Ability to increase a worker’s compensation Ability to increase a worker’s compensation  Penalty Ability to dispense or cause punishment Ability to dispense or cause punishment  Work challenge Worker’s enjoyment of doing a task Worker’s enjoyment of doing a task  Expertise possession of special knowledge important to others possession of special knowledge important to others  Friendship Personal relationship with others Personal relationship with others

10. Copyright 2006 John Wiley & Sons, Inc.9-10 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

11. Copyright 2006 John Wiley & Sons, Inc.9-11 Guides to Breakdown:  Have definite beginning and end.  Have clear performance criteria.  Be budgetable.  Be a single meaningful job.  Have responsibility assigned to individual.

12. Copyright 2006 John Wiley & Sons, Inc.9-12 Work Breakdown Structure for Computer Order Processing System Project

13. Copyright 2006 John Wiley & Sons, Inc.9-13  Organizational Breakdown Structure a chart that shows which organizational units are responsible for work items a chart that shows which organizational units are responsible for work items  Responsibility Assignment Matrix shows who is responsible for work in a project shows who is responsible for work in a project

14. Copyright 2006 John Wiley & Sons, Inc.9-14 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

15. Copyright 2006 John Wiley & Sons, Inc.9-15 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

16. Copyright 2006 John Wiley & Sons, Inc.9-16 |||||||||| 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

17. Copyright 2006 John Wiley & Sons, Inc.9-17 Project Control  Time management  Cost management  Performance management Quality management Quality management  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  Enterprise project management

18. Copyright 2006 John Wiley & Sons, Inc.9-18 Controlling a “Project” Required performance Performance Budget limit Cost Due Date Target Cumulative Time (“schedule”)

19. Copyright 2006 John Wiley & Sons, Inc.9-19 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

20. Copyright 2006 John Wiley & Sons, Inc.9-20 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

21. Copyright 2006 John Wiley & Sons, Inc.9-21 AOA Project Network for a House 3 20 1 3 11 1 12467 3 5 Lay foundation Design house and obtain financing Order and receive materials Dummy Finish work Select carpet Select paint Build house

22. Copyright 2006 John Wiley & Sons, Inc.9-22 Concurrent Activities 23 Lay foundation Order material (a)Incorrect precedence relationship (b)Correct precedence relationship 3 42 Dummy Layfoundation Order material 1 20

23. Copyright 2006 John Wiley & Sons, Inc.9-23 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

24. Copyright 2006 John Wiley & Sons, Inc.9-24 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

25. Copyright 2006 John Wiley & Sons, Inc.9-25 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

26. Copyright 2006 John Wiley & Sons, Inc.9-26 Mode Configuration 103 303 Activity number Activity duration Earliest start Latest start Earliest finish Latest finish

27. Copyright 2006 John Wiley & Sons, Inc.9-27 Forward Pass   Start at the beginning of CPM/PERT network to determine the earliest activity times   Earliest Start Time (ES) earliest time an activity can start ES = maximum EF of immediate predecessors   Earliest finish time (EF) earliest time an activity can finish earliest start time plus activity time EF= ES + t

28. Copyright 2006 John Wiley & Sons, Inc.9-28 Earliest Activity Start and Finish Times 103 1 235 2 334 1 556 1 458 3 667 1 789 1 Start Design house and obtain financing Select pain Lay foundations Select carpet Build house Finish work Order and receive materials

29. Copyright 2006 John Wiley & Sons, Inc.9-29 Backward Pass   Determines latest activity times by starting at the end of CPM/PERT network and working forward   Latest Start Time (LS) Latest time an activity can start without delaying critical path time LS= LF - t   Latest finish time (LF) latest time an activity can be completed without delaying critical path time LS = minimum LS of immediate predecessors

30. Copyright 2006 John Wiley & Sons, Inc.9-30 Latest Activity Start and Finish Times 103 103 235 235 334 145 556 167 458 358 667 178 789 189 Start Design house and obtain financing Select pain Lay foundations Select carpet Build house Finish work Order and receive materials

31. Copyright 2006 John Wiley & Sons, Inc.9-31 * 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

32. Copyright 2006 John Wiley & Sons, Inc.9-32 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

33. Copyright 2006 John Wiley & Sons, Inc.9-33 Examples of Beta Distributions P(time) Time amtbamtb m = t Time Time ba

34. Copyright 2006 John Wiley & Sons, Inc.9-34 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

35. Copyright 2006 John Wiley & Sons, Inc.9-35 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

36. Copyright 2006 John Wiley & Sons, Inc.9-36 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

37. Copyright 2006 John Wiley & Sons, Inc.9-37 StartFinish 10 8 819 30 3 325 48 13 51621 63 7 459 73 5 21416 99 13 41216 10 13 17 103 20 6 606 56 9 369 89 16 79 11 16 25 91625 Critical Path Earliest, Latest, and Slack

38. Copyright 2006 John Wiley & Sons, Inc.9-38  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

39. Copyright 2006 John Wiley & Sons, Inc.9-39 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 -  

40. Copyright 2006 John Wiley & Sons, Inc.9-40 Normal Distribution Of Project Time  = t p Timex ZZ Probability

41. Copyright 2006 John Wiley & Sons, Inc.9-41 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)

42. Copyright 2006 John Wiley & Sons, Inc.9-42 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

43. Copyright 2006 John Wiley & Sons, Inc.9-43 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

44. Copyright 2006 John Wiley & Sons, Inc.9-44 1 12 2 8 4 3 4 5 4 6 4 7 4 Project Crashing: Example

45. Copyright 2006 John Wiley & Sons, Inc.9-45 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

46. Copyright 2006 John Wiley & Sons, Inc.9-46 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

47. Copyright 2006 John Wiley & Sons, Inc.9-47 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…

48. Copyright 2006 John Wiley & Sons, Inc.9-48  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

49. Copyright 2006 John Wiley & Sons, Inc.9-49 Time-Cost Tradeoff Cost ($) Project duration CrashingTime Minimum cost = optimal project time Total project cost Indirect cost Direct cost