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MBA 8452 Systems and Operations Management
PROJECT MANAGEMENT
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Introduction to Operations Management/ Operations Strategy
Process Analysis and Design Project Management Planning for Production Process Control and Improvement Process Analysis Capacity Management Quality Management Aggregate Planning Job Design Statistical Process Control Just in Time Scheduling Manufacturing Layout/ Assembly Line Balancing Inventory Control Supply Chain Management Services Waiting Line Analysis
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Objective: Project Management
Defining Project Management Work Breakdown Structure Types of Projects Gantt Chart and Network Diagrams CPM Crashing the Project
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CPM (One Time Estimate) Example 1
Repair of a garage damaged by fire and & the house damaged by smoke Activity Designation Immed. Pred. Time (Weeks) Assess damages to the home A None 1 Write and submit plan to do the job B Obtain approval C Get the building inspected D 2 Hire and schedule contractors E Complete the work F D, E 12 Inspect the completed work G
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Project A set of activities (tasks) that are interrelated with a common aim to produce a valuable output Characteristics Large-scale, one of a kind, time consuming Precedence relationship among activities Time and budget limits
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Project Management Planning, directing, and controlling resources (people, equipment, material) to meet specific objectives within the technical, cost, and time constraints of the project We use a team approach to organize for project management.
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Project Organizational Structures
Pure Project performed by a self-contained team works full time on the project Functional Project each component is performed by people within a functional area Matrix Project A combination of pure and functional projects
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Pure Project Pure Project - a self-contained team works full time on the project Project Manager Team Member A Team Member B Team Member C Team Member D Team Member E Each team member has a specialty area: purchasing, design engineering, operations, accounting, etc.
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Pure Project: Advantages
Full authority of project manager One boss to report Shortened communication lines High team pride, motivation, and commitment
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Pure Project: Disadvantages
Duplication of resources Lack of organizational goals and policies Lack of technology transfer No functional area "home” for team members
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Functional Project
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Functional Project: Advantages
Shared manpower and resources Maintained technical expertise within the functional area Nature “home” in the functional area for team members Critical mass of specialized knowledge
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Functional Project: Disadvantages
Compromised non-functional-related activities Weak motivation of team members Slow response to clients’ needs
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Matrix Project
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Matrix Project: Advantages
Enhanced interfunctional communications Pinpointed responsibility Minimized duplication of resources Functional home for team members
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Matrix Project: Disadvantages
Two bosses Depends on Project Manager’s negotiating skills Potential for suboptimization
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Work Breakdown Structure (WBS)
Program- Restoration of Homes Damaged by Fire Project 1 Project 2 Task 1.1 Subtask 1.1.1 Work Package Level 1 2 3 4 Task 1.2 Subtask 1.1.2 Work Package Baker’s Home Carr’s Home Work with Insurance to assess damages Work with Insurance to assess damages Write & submit proposal to do the work Write & submit proposal to do the work Hire contractors to do the work: construction, electrical, painters, etc.
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Work Breakdown Structure
Program: New Plant Construction and Start-up Project 1: Analytical Study Task 1: Marketing/Production Study Task 2: Cost Effectiveness Analysis Project 2: Design and Layout Task 1: Product Processing Sketches Task 2: Product Processing Blueprints Project 3: Installation Task 1: Fabrication Task 2: Setup Task 3: Testing and Run
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Representing Projects: Gantt Chart
Time Activities A B C D E
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Representing Projects: Network Diagram
8 10 D B 20 18 A E 30 C
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Critical Path Scheduling: CPM and PERT
CPM (Critical Path Method) J. E. Kelly of Remington-Rand and M. R. Walker of Du Pont (1957) Scheduling maintenance shutdowns of chemical processing plants PERT (Program Evaluation and Review Technique) U.S. Navy Special Projects Office (1958) Polaris missile project
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CPM (One Time Estimate) Example 1
Consider the following consulting project: Activity Designation Immed. Pred. Time (Weeks) Assess customer's needs A None 2 Write and submit proposal B 1 Obtain approval C Develop service vision and goals D Train employees E 5 Quality improvement pilot groups F D, E Write assessment report G Develop a critical path diagram and determine the duration of the critical path and slack times for all activities
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Represent the Project: Gantt Chart
Example1
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Network Diagram A, 2 B, 1 C, 1 D, 2 E, 5 F, 5 G, 1 Example 1
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Forward Pass: Calculate Early Start and Early Finish times
EF=6 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=4 EF=9 ? A, 2 B, 1 C, 1 D, 2 E, 5 F, 5 G, 1 Example 1
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Calculation for Merged Activity (F)
ES=9 EF=14 ES=14 EF=15 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=4 EF=9 EF=6 A, 2 B, 1 C, 1 D, 2 E, 5 F, 5 G, 1 Example 1
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Backward Pass: Calculate Late Finish and Late Start times
G, 1 LS=14 LF=15 LS=9 LF=14 LS=4 LF=9 LS=7 ? Example 1
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Calculation for Fork Activity (C)
ES=9 EF=14 ES=14 EF=15 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=4 EF=9 EF=6 A, 2 B, 1 C, 1 D, 2 E, 5 F, 5 G, 1 LS=14 LF=15 LS=9 LF=14 LS=4 LF=9 LS=7 LS=3 LF=4 LS=2 LF=3 LS=0 LF=2 Example 1
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Critical Path & Slack Times
EF=14 ES=14 EF=15 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=4 EF=9 EF=6 A, 2 B, 1 C, 1 D, 2 E, 5 F, 5 G, 1 LS=14 LF=15 LS=9 LF=14 LS=4 LF=9 LS=7 LS=3 LF=4 LS=2 LF=3 LS=0 LF=2 Duration = 15 weeks Slack=(7-4)=(9-6)= 3 Wks Slack=0 Slack=0 Slack=0 Slack=0 Slack=0 Slack=0 Critical path: A, B, C, E, F, G Example 1
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Summary Q: What is the minimum time to finish the project A: 15 weeks
Q: Which activities are critical for whole project? A: Activities A, B, C, E, F, G Q: Which activities can be delayed, by how much? A: D, 3 weeks Example 1
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Questions Addressed by CPM/PERT
When will the project be completed? Which tasks are most critical to ensure timely completion of the project Which tasks can be delayed if necessary without delaying the whole project? When there is uncertainty how likely can the project be completed by due date?
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Critical Path Scheduling with Three Time Estimates
Three estimates of the completion time for each activity (task) a = optimistic time m = most-likely time b = pessimistic time
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Solution Procedure Calculate the mean of each task time
Calculate the variance of each task time Determine the critical path using the estimated time Calculate variance and the standard deviation of the critical path Calculate probability of the time to complete the project by a certain date
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PERT (Three Time Estimates) Example 2
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Expected Times and Variances: Calculation
Example 2
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Network Diagram with ET
B 5.333 C, 14 D, 5 E, 11 F, 7 H, 4 G, 11 I, 18 Example 2
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Critical Path Method A, 7 B C, 14 D, 5 E, 11 F, 7 H, 4 G, 11 I, 18
21 21 32 A, 7 B 5.333 C, 14 D, 5 E, 11 F, 7 H, 4 G, 11 I, 18 32 36 EF=7 7 21 21 32 ES=0 7 12 12 19 LS=0 LF=7 32 36 36 54 20 25 25 32 36 54 5.333 16.333 5.333 25 36 19.667 25 Critical Path = A-C-E-H-I Expected Completion Time= 54 Example 2
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Formulas Calculate standard deviation of the critical path
Calculate probability of the time to complete the project (T) base on the statistic: = variance of a task on critical path D = Due date TE = Expected project completion time
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Standard Deviation of CP
Now we have expected project completion time (TE) = 54 days standard deviation of critical path = The Z statistic is Example 2
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Calculate Probabilities of Completion
What is the probability of finishing this project in less than 53 days? Solution: Since D = 53, P(T < D) = P(Z < ) = .436, or 43.6 % (See Appendix D) T TE = 54 P(T < D) 53 Example 2
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Calculate Probabilities of Completion
What is the probability that the project duration will exceed 56 weeks? Solution: Since D = 56, P(T > D) = P(Z > ) = .377, or 37.7 % (See Appendix D) T TE = 54 P(T > D) 56 Example 2
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Expediting A Project Time-Cost Model
Motivations to accelerate a project Avoid late penalties Get incentive payments for early completion Free resources for other uses Basic Assumption: some activities can be expedited, at a cost Time-Cost Tradeoff Problem What is the optimum project schedule based on time-cost tradeoffs?
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Time-Cost Relationships
Activity Direct Costs—direct labor expenses, materials, per-diem expenses—increase as the project duration is shortened Project Indirect Costs—overhead, facilities, resource opportunity cost—increase as project completion time increases
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Time-Cost Trade-Off Model Illustration
Total cost Minimum cost = optimal project time Cost ($) Indirect cost Direct cost Crashing Time Project Duration
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Time-Cost Model Some Terminology
Normal Cost: the cost to complete an activity under normal condition (normal expected cost) Normal Time: the time to complete an activity under normal condition (with normal cost) Crash Time: the shortest possible time to complete an activity Crash Cost: the cost to complete an activity within crash time
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Time-Cost Model Solution Procedure
Find the critical path with normal times Compute unit cost to crash each activity Shorten the critical path one day (or week etc.) at a time with the least cost activity Find the minimum-total-cost crashing schedule
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Time-Cost Model Example 3
B F C D E 6 10 5 4 2 9 Assume project indirect cost = $1000/day
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Critical Path and Unit Crash Cost
Determine normal critical path A-B-F: Duration = 18 C-D-E-F: Duration = 20 (critical path) Calculate cost per day to crash Example 3
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Shortening The Project
Example 3
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What Is the Best Schedule?
Example 3
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Caveat on the Following CPM/PERT Assumptions
Project activities can be identified as entities with a clear beginning and ending point for each activity Project activity sequence relationships can be specified and networked Project control should focus on the critical path The expected activity times and variances in PERT are based on beta distribution
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