Ch. 9 Project Management

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  • 1. Beni Asllani University of Tennessee at Chattanooga Project Management Operations Management - 5 th Edition Chapter 9 Roberta Russell & Bernard W. Taylor, III
  • 2. Lecture Outline
    • Project Planning
    • Project Scheduling
    • Project Control
    • CPM/PERT
    • Probabilistic Activity Times
    • Project Crashing and Time-Cost Trade-off
  • 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. Project Elements
    • Objective
    • Scope
    • Contract requirements
    • Schedules
    • Resources
    • Personnel
    • Control
    • Risk and problem analysis
  • 5. Project Management Process
    • Project planning
    • Project scheduling
    • Project control
    • Project team
      • 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
    • Project Manager
      • most important member of project team
  • 6. Project Scope
    • Scope statement
      • a document that provides an understanding, justification, and expected result of a project
    • Statement of work
      • written description of objectives of a project
    • Work breakdown structure
      • breaks down a project into components, subcomponents, activities, and tasks
  • 7. Work Breakdown Structure for Computer Order Processing System Project
  • 8.
    • Organizational Breakdown Structure
      • a chart that shows which organizational units are responsible for work items
    • Responsibility Assignment Matrix
      • shows who is responsible for work in a project
  • 9. Project Scheduling
    • Steps
      • Define activities
      • Sequence activities
      • Estimate time
      • Develop schedule
    • Techniques
      • Gantt chart
      • CPM
      • PERT
      • Microsoft Project
  • 10. 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
  • 11. Example of Gantt Chart | | | | | Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work 0 2 4 6 8 10 Month Month 1 3 5 7 9
  • 12. Project Control
    • Time management
    • Cost management
    • Quality management
    • Performance 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
    • Communication
    • Enterprise project management
  • 13. CPM/PERT
    • Critical Path Method (CPM)
      • DuPont & Remington-Rand (1956)
      • Deterministic task times
      • Activity-on-node network construction
    • Project Evaluation and Review Technique (PERT)
      • US Navy, Booz, Allen & Hamilton
      • Multiple task time estimates
      • Activity-on-arrow network construction
  • 14. 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
  • 15. AOA Project Network for a House 3 2 0 1 3 1 1 1 1 2 4 6 7 3 5 Lay foundation Design house and obtain financing Order and receive materials Dummy Finish work Select carpet Select paint Build house
  • 16. Concurrent Activities 2 3 Lay foundation Order material (a) Incorrect precedence relationship (b) Correct precedence relationship 3 4 2 Dummy Lay foundation Order material 1 2 0
  • 17. AON Network for House Building Project 1 3 2 2 4 3 3 1 5 1 6 1 7 1 Start Design house and obtain financing Order and receive materials Select paint Select carpet Lay foundations Build house Finish work
  • 18. Critical Path
    • Critical path
      • Longest path through a network
      • 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 1 3 2 2 4 3 3 1 5 1 6 1 7 1 Start
  • 19. 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
  • 20. Mode Configuration Activity number Activity duration Earliest start Latest start Earliest finish Latest finish 1 0 3 3 0 3
  • 21. 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
  • 22. Earliest Activity Start and Finish Times 1 0 3 1 2 3 5 2 3 3 4 1 5 5 6 1 4 5 8 3 6 6 7 1 7 8 9 1 Start Design house and obtain financing Select pain Lay foundations Select carpet Build house Finish work Order and receive materials
  • 23. 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
  • 24. Latest Activity Start and Finish Times 1 0 3 1 0 3 2 3 5 2 3 5 3 3 4 1 4 5 5 5 6 1 6 7 4 5 8 3 5 8 6 6 7 1 7 8 7 8 9 1 8 9 Start Design house and obtain financing Select pain Lay foundations Select carpet Build house Finish work Order and receive materials
  • 25. Activity Slack * Critical Path 0 9 9 8 8 *7 1 7 8 6 7 6 1 6 7 5 6 5 0 8 8 5 5 *4 1 4 5 3 4 3 0 5 5 3 3 *2 0 3 3 0 0 *1 Slack S EF LF ES LS Activity
  • 26. 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
  • 27. Examples of Beta Distributions P (time) P (time) P (time) Time a m t b a m t b m = t Time Time b a
  • 28. Project Network with Probabilistic Time Estimates: Example Start Finish 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
  • 29. Activity Time Estimates 1 6 8 10 8 0.44 2 3 6 9 6 1.00 3 1 3 5 3 0.44 4 2 4 12 5 2.78 5 2 3 4 3 0.11 6 3 4 5 4 0.11 7 2 2 2 2 0.00 8 3 7 11 7 1.78 9 2 4 6 4 0.44 10 1 4 7 4 1.00 11 1 10 13 9 4.00 TIME ESTIMATES (WKS) MEAN TIME VARIANCE ACTIVITY a m b t б 2
  • 30. Activity Early, Late Times, and Slack ACTIVITY t б  ES EF LS LF S 1 8 0.44 0 8 1 9 1 2 6 1.00 0 6 0 6 0 3 3 0.44 0 3 2 5 2 4 5 2.78 8 13 16 21 8 5 3 0.11 6 9 6 9 0 6 4 0.11 3 7 5 9 2 7 2 0.00 3 5 14 16 11 8 7 1.78 9 16 9 16 0 9 4 0.44 9 13 12 16 3 10 4 1.00 13 17 21 25 8 11 9 4.00 16 25 16 25 0
  • 31. Earliest, Latest, and Slack Critical Path Start Finish 1 0 8 8 1 9 3 0 3 3 2 5 4 8 13 5 16 21 6 3 7 4 5 9 7 3 5 2 14 16 9 9 13 4 12 16 10 13 17 1 0 3 2 0 6 6 0 6 5 6 9 3 6 9 8 9 16 7 9 16 11 16 25 9 16 25
  • 32.
    • 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
  • 33. 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 = x -  
  • 34. Normal Distribution Of Project Time  = t p Time x Z  Probability
  • 35. Southern Textile Example What is the probability that the project is completed within 30 weeks? 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  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = 1.91 x -   30 - 25 2.62  = 25 Time (weeks) x = 30 P ( x  30 weeks)
  • 36. Southern Textile Example What is the probability that the project is completed within 22 weeks? 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 Time (weeks) x = 22 P ( x  22 weeks)  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = -1.14 x -   22 - 25 2.62
  • 37. 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
  • 38. Project Crashing: Example 1 12 2 8 4 12 3 4 5 4 6 4 7 4
  • 39. Project Crashing: Example (cont.) $7,000 – $6,000 – $5,000 – $4,000 – $3,000 – $2,000 – $1,000 – – | | | | | | | 0 2 4 6 8 10 12 14 Weeks Normal activity Normal time Normal cost Crash time Crashed activity Crash cost Slope = crash cost per week
  • 40. Normal Activity and Crash Data TOTAL NORMAL CRASH ALLOWABLE CRASH TIME TIME NORMAL CRASH CRASH TIME COST PER ACTIVITY (WEEKS) (WEEKS) COST COST (WEEKS) WEEK 1 12 7 $3,000 $5,000 5 $400 2 8 5 2,000 3,500 3 500 3 4 3 4,000 7,000 1 3,000 4 12 9 50,000 71,000 3 7,000 5 4 1 500 1,100 3 200 6 4 1 500 1,100 3 200 7 4 3 15,000 22,000 1 7,000 $75,000 $110,700
  • 41. FROM … 1 12 2 8 3 4 5 4 6 4 7 4 $400 $500 $3000 $7000 $200 $200 $700 12 4 Project Duration: 36 weeks 1 7 2 8 3 4 5 4 6 4 7 4 $400 $500 $3000 $7000 $200 $200 $700 12 4 Project Duration: 31 weeks Additional Cost: $2000 TO…
  • 42. Time-Cost Relationship
    • Crashing costs increase as project duration decreases
    • Indirect costs increase as project duration increases
    • Reduce project length as long as crashing costs are less than indirect costs
  • 43. Time-Cost Tradeoff Cost ($) Project duration Crashing Time Minimum cost = optimal project time Total project cost Indirect cost Direct cost
  • 44. Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.