OM Session 15 and 16.pdf

MBA-Term I
Operations Management – Session 15 & 16
Topic: Project Management
Dr. Nageswara Reddy Kondreddy
Assistant Professor in Operations and Supply Chain
Indian Institute of Management Jammu
Email: nageswara@iimj.ac.in

Dr. K N Reddy Indian Institute of Management Jammu
Agenda
• Project and Project management
• Project Life Cycle
• Project Initiation
• Project Planning
• Project Scheduling
• AOA and AON
• Network Techniques
• Cost–Time Trade-Offs and Project Crashing
• Monitoring and Controlling
• Project Management Software
2

Project
• Managers typically oversee a variety of operations.
• Some of these involve routine, repetitive activities, but
• Others involve nonroutine activities
• Projects – “Unique, one-time operations designed to accomplish a specific set of
objectives in a limited time frame”
• Examples:
• Constructing a shopping complex,
• Merging two companies,
• Designing and running a political campaign.
• Designing new products or services,
• Designing advertising campaigns,
• Designing information systems,
• Reengineering a process,
• Designing databases, software development, and
• designing Web pages.
3

Project management
• What is project management?
• A team-based approach for managing projects.
• How is it different from general operations management?
1. Limited time frame
2. Narrow focus, specific objectives
3. Less bureaucratic
• Why is it used?
1. Special needs that don’t lend themselves to functional management
2. Pressures for new or improved products or services, cost reduction
• What are the key metrics?
1. Time
2. Cost
3. Performance objectives
4

Project management
• What are the key success factors?
1. Top-down commitment
2. A respected and capable project manager
3. Enough time to plan
4. Careful tracking and control
5. Good communications
• What are the major administrative issues?
1. Executive responsibilities:
a. Project selection
b. Selection of a project manager
c. Organizational structure (To whom will the project manager report?)
2. Organizational alternatives:
a. Manage within functional unit
b. Assign a coordinator
c. Use a matrix organization with a project leader
5

Project management
• What are the main tools?
1. Work breakdown structure: An initial planning tool that is needed to develop a list of
activities, activity sequences, and a realistic budget
2. Network diagram: A “big picture” visual aid that is used to estimate project duration,
identify activities that are critical for timely project completion, identify areas where slack
time exists, and develop activity schedules
3. Gantt charts: A visual aid used to plan and monitor individual activities
4. Risk management: Analyses of potential failures or problems, assessment of their
likelihood and consequences, and contingency plans
6

Project Life Cycle
• The size, length, and scope of projects vary widely according to the nature and purpose
of the project.
• All projects have go through a life cycle, which typically consists of five phases
1. Initiating
• Begins the process by outlining the expected costs, benefits, and risks associated with a project.
• Define the major project goals and choose a project manager
2. Planning
• Provides details on deliverables, scope of the project, budget, schedule and milestones, performance objectives,
resources needed, a quality plan, and a plan for handling risks
• Members of the project team are chosen.
3. Executing
• The actual work of the project is carried out
4. Monitoring and Controlling
• Occurs at the same time as project execution.
• Involves comparing actual progress with planned progress and undertakes corrective action if needed,
5. Closing
• Ends the project
7

Project Life Cycle
8

Project Initiation
9

Project Planning
10

Resources Planning
• Resources are required to carry out the project tasks. These can be people,
equipment, facilities, funding, or anything else
• Resource planning is used to determine and identify an approach to ensure that
sufficient resources are available for the successful completion of the project
11
The tools
and
infrastruct
ure used
to
produce
other
goods and
services
The set
of people
who make
up the
workforce
of an
project

The Project Team
• Project Team – A team whose members usually belong to different groups,
functions and are assigned to activities for the same project.
• Project teams provide preliminary estimates based on scope, schedule, and
resources back to management, management is not happy with this response and
makes adjustments, and so on
• Advantages of Project Teams:
• Clear object of the project
• Good decision making process
• Clear roles responsibilities and leadership
• Trust, cooperation, support and constructive conflict
• Individual and mutual accountability for performance results
12

Project Manager
• The project manager will lead, motivate and inspire the project team to achieve the
objectives of the project.
• This is done by setting clear objectives for each team leader/member and recognizing
achievement when each objectives has been accomplished
• Key competencies/Skills of project manager are:
a. Execution.
b. Decision Making.
c. Communications.
d. Strategy Development.
e. Team Management.
f. Business Acumen.
g. Technical Competence.
h. Critical Thinking.
13

The Project Team - Health care Project
14

The Project Team – Constructing Project
• Constructing a dam - determine how to
form a project team.
• Assume that the size of our hypothetical
project is fairly large.
• In addition to the PM, an appropriate
number of design architects, engineers,
testers, clerks, and the like.
• This example can be applied to any
construction project, a medical research
project, or any of a wide variety of other
types of projects.
• The titles of the individuals would change,
but the roles played would be similar.
15
Design
Architect

Project management in the manufacturing industry
16
https://www.youtube.com/watch?v=gYCAmu14oYw

Work Breakdown Structure (WBS)
• A hierarchical description of a
project into more and more
detailed components.
• Establishes a logical framework
for identifying the required
activities for the project
17

Project Scheduling
• A schedule is the conversion of a project work breakdown structure (WBS) into
an operating timetable.
• The listing of activities, deliverables, and milestones within a project.
• It usually includes a planned start and finish date, duration, and resources
assigned to each activity.
• Effective project scheduling is a critical component of successful time
management.
• The basic approach of all scheduling techniques is to form a network of activity
and event relationships that graphically portrays the sequential relations between
the tasks in a project.
• Tasks that must precede or follow other tasks are then clearly identified, in time
as well as in function.
18

Purposes of Project Scheduling
1. Shows the relationship of each activity to others and to the whole project
2. Identifies the precedence relationships among activities
3. Encourages the setting of realistic time and cost estimates for each activity
4. Helps make better use of people, money, and material resources by identifying
critical bottlenecks in the project
19

Network Diagram or Project Graph
• A Network Diagram shows the activities
and events of the project and their logical
relationships.
• The Network Diagram can be developed
by using Forward Method or Backward
Method.
• Provide a basis for planning and how to
use the resources
• Identify the critical path and project
completion time
• Reveal independencies of activities
20

Rules for Network Construction
• Networks flow typically from left to
right.
• Each activity must have a preceding and
succeeding event
• Each activity should have a unique
identification number.
• There should be no Loops in the
project network
• Not more than one activity can have the
same preceding and succeeding events
21
In previous example, the
activity of "Send Invitations" is
designated as (1-2)

Terminology
• Activity: A time consuming task. A specific task or set of tasks that are required by
the project, use up resources. For example, designing a part, connecting a bridge
girder. Activity is represented by an arrow
• Event: A milestone. The result of completing one or more activities. Does not
consume time or resources.
22
i j A is called as an Activity
A
i j
A
Tail Event Head Event

Terminology
• Network: Arrangement of all activities (and, in some cases, events) in a project
arrayed in their logical sequence and represented by arcs and nodes.
• Path: series of connected activities (or intermediate events) between any two
events in a network
23
i j
A
k
B C
i j
A
k
B C
Path one: i→ j
Path two: i → k → j

Terminology
• Critical Path: the longest sequence of activities from project start to finish that
must be completed to ensure the project is finished by a certain time.
• Burst Point Sink
24
Event 26 must
take place prior
to events 7, 18,
and 31.
Events 7, 18,
and 31 must take
place prior to
event 26

Methods to project networks
• Activity-On-Node: Nodes representing the activities
• Activity-on-Arch: Arch's represent the activities
25
A B
i j
A

Methods to project networks
26
AOA Network
Name Activity Duration
A 1-2 30
B 2-3 13
C 2-4 20
D 3-5 16
E 4-5 6
F 5-6 5
AON Network
1 2
3
4
5 6
13
20
16
6
5
30
6
A
B
C
F
D
E
30 13 16
20
5

Methods to project networks – Example 1
27
Task ID Task Name Predecessor Duration (Hours)
A Excavation - 8
B Dressing and Ramming A 12
C Brickwork of Manholes A 24
D Pipe laying and jointing B, C 8
E Backfilling and compaction D 16
F Surface PCC E 24
1 2
3
4 5 6
B, 12
C, 24
D, 8
A, 8
E, 16
7
F, 24
AOA Network

Methods to project networks – Example 1
28
Task ID Task Name Predecessor Duration (Hours)
A Excavation - 8
B Dressing and Ramming A 12
C Brickwork of Manholes A 24
D Pipe laying and jointing B, C 8
E Backfilling and compaction D 16
F Surface PCC E 24
AON Network
A
B
C
D E F
8
12
24
8 16 24

Showing The Use of a Dummy Task
29
Start
A
1 3
C
F
Finish
5
G
E
2
4
B
D
H
• Dummy activities are artificial activities in the network either to show dependency or to
avoid duplicate numbering of activities
• Represented by a dotted line, and do not consume resources or require time.

Methods to project networks - Conventions
31

Introduction to Network Techniques
• Management is continually seeking new and better control techniques to cope with
the complexities, masses of data, and tight deadlines that are characteristic of
highly competitive industries.
• Managers also want better methods for presenting technical and cost data to
customers.
• Scheduling techniques help to achieve goals. The most common techniques are
• Gantt or bar charts
• Milestone charts
• Networks
• Program Evaluation and Review Technique (PERT)
• Arrow Diagram Method (ADM) [Sometimes called the Critical Path Method
(CPM)]
• Precedence Diagram Method (PDM)
• Graphical Evaluation and Review Technique (GERT)
32

Gantt or bar charts
• It was introduced by Henry Gantt around
1910 – 1915.
• A type of bar chart that illustrates a
project schedule.
• A common technique for representing the
phases and activities of a project work
breakdown structure.
• Gantt charts often include such items as
listings of activities, activity duration,
schedule dates, and progress-to-date.
• Gantt Charts are simple to understand and
easy to change
• As easy to construct as a network
34
Bar chart for single activities.
Bar chart for Combined activities.

Gantt or bar charts
35
Each row identifies the
corresponding task
Start time of the
task
End time of the
task
Duration of the task

Gantt chart – Example 1
Task Task Name Duration Predecessor
A Contract Signing 5 Days
B
Questionarrie
Design
5 Days A
C
Target Market
ID
6 Days A
D Survey Sample 13 Days B, C
E
Develop
Presentation
6 Days B
F Analyze Results 4 Days D
G
Demographic
Analysis
9 Days C
H
Presentation to
the client
2 Days E, F, G
36
H
A
B E
F
G
C
D
5
4
6
6
13
2
9
5
H
A
B E
F
G
C
D
5
4
6
6
13
2
9
5

Gantt chart – Example 2
37

Gantt chart - Advantages and Disadvantages
• Advantages
• Easy to understood though they contain a great deal of information.
• Easy to maintain as long as task requirements are not changed or major alterations of the
schedule are not made.
• Gantt charts provide a picture of the current state of a project.
• Disadvantages
• If a project is complex with a large set of activities, it may be very difficult to follow
multiple activity paths through the project
38

Milestone chart
• A milestone schedule, or milestone chart, is simply a timeline that uses milestones
to divide a project schedule into major phases
• Improvement over the Gantt chart
39
Milestones
Contract Signing
Questionarrie Design
Target Market ID
Survey Sample
Develop Presentation
Analyze Results
Demographic Analysis
Presentation to the client

Milestone chart – Example 2
40

PERT/CPM
• PERT originally was used in research and development (R&D), a field in which
activity duration estimates can be difficult to make, and resulted from probability
analysis.
• CPM was developed independently at the same time as PERT by DuPont, Inc.
• CPM, used commonly in the construction industry, differs from PERT primarily
in the assumptions it makes about estimating activity durations.
• CPM assumes that durations are more deterministic; that is, they are easier to
ascertain and can be assigned to activities with greater confidence.
• CPM was designed to better link (and therefore control) project activity time and
costs, particularly the time–cost trade-offs that lead to crashing decisions
(speeding up the project).
41

Critical Path Method (CPM)
• CPM is a network diagramming technique used to predict total project duration
• A critical path for a project is the series of activities that determines the earliest time by
which the project can be completed
• Slack/float
42

Forward Pass—Earliest Times: The forward pass starts with the first project activity
and traces each path (chain of sequential activities) through the network to the last
project activity.
1. How soon can the activity start? (early start—ES)
2. How soon can the activity finish? (early finish—EF)
3. How soon can the project be finished? (expected time—TE)
Consider these three things when computing early activity times:
i. You add activity times along each path in the network (ES + DUR = EF).
ii. You carry the early finish (EF) to the next activity where it becomes its early start (ES), or
iii. If the next succeeding activity is a merge activity, you select the largest early finish
number (EF) of all its immediate predecessor activities.
43

Backward Pass—Latest Times: The backward pass starts with the last project
activity on the network. You trace backward on each path subtracting activity times
to find the late start (LS) and late finish (LF) times for each activity
1. How late can the activity start? (late start—LS)
2. How late can the activity finish? (late finish—LF)
3. Which activities represent the critical path (CP)? This is the longest path in the network
which, when delayed, will delay the project.
4. How long can the activity be delayed? (slack or float—SL)
Consider following three things:
i. You subtract activity times along each path starting with the project end activity (LF −
DUR = LS).
ii. You carry the LS to the preceding activity to establish its LF, or
iii. If the next preceding activity is a burst activity; in this case you select the smallest LS of
all its immediate successor activities to establish its LF.
44

Critical Path Method (CPM) – AON Network
45
A B
Duration dA
Slack =LF𝐴 − EF𝐴
Duration dB
A B
ES𝐴
LF𝐴
ES𝐵
LF𝐵
E𝐹𝐴
LS𝐴 LS𝐵
E𝐹𝐵
=L𝑆𝐴 − ES𝐴

Critical Path Method (CPM) – AON Network
46
9
0
The Critical path is
Start → Task A → Task D → Task E → Finish
0
Task Duration Predecessor ES EF LS LF
A 3 Days 0 3 0 3
B 2 Days 0 2 3 5
C 4 Days B 2 6 5 9
D 3 Days A 3 6 3 6
E 3 Days D 6 9 6 9
0 3
0 3
3
3 6
6 6
6
9
9
9
9
0
0
3
2
5
2
5
6
9

Critical Path Method (CPM) – AOA Network
47
i j
Activity
Duration
AOA
Slack
E𝑆𝑖
Slack
LS𝑖
E𝐹
𝑗
LF𝑗
Activity
Duration
Slack =L𝐹𝑖 − EF𝑖

1
3 4
2 5
Critical Path Method (CPM) – AOA Network
48
15
0
The Critical path is
Start → Task A → Task E → Task F
→ Task G → Task I → Finish
3
A
6 9
6
2
0
B
C
E
F
3
3
2
4
G
H
D
6
13
3
4
5
3
13
9
10
6
6
3
0
0 0
0 0
4 4
0 End
I
2
15
15
0
Task Duration Predecessor ES EF LS LF
A 3 Days 0 3 0 3
B 2 Days 0 2 3 5
C 4 Days B 2 6 5 9
D 3 Days C 6 9 3 13
E 3 Days A 3 6 3 6
F 3 Days E 6 9 6 9
G 4 Days F 9 13 9 13
H 5 Days A 3 8 8 13
I 2 Days D,G,H 13 15 13 15

Program Evaluation and Review Technique (PERT)
• A management planning and control tool.
• Considered as a road map for a particular program or project in which all of the
major elements (events) have been completely identified, together with their
corresponding interrelation
• PERT charts are often constructed from back to front because, for many projects,
the end date is fixed and the contractor has front-end flexibility
• Purpose: to determine how much time is needed to complete the project
• PERT is almost identical to the critical path method (CPM) technique except it
assumes each activity duration has a range that follows a statistical distribution
• PERT – Probabilistic values
CPM – Deterministic values
51

PERT
• PERT uses three time estimates (optimistic, most likely, and pessimistic) for each
activity. Basically, this means each activity duration can range from an optimistic
time to a pessimistic time, and a weighted average can be computed for each
activity.
• PERT developers chose an approximation of the beta distribution to represent
activity durations
• The activity durations can be skewed more toward the high or low end of the data
range.
52

• The weighted average activity time is computed by the following formula:
• The variability in the activity time estimates is approximated by
Standard deviation for the activity
Standard deviation for the project.
PERT
53

PERT
• The average project duration (𝑇𝐸) is the sum of all the average activity times along
the critical path (sum of 𝑡𝑒), and it follows a normal distribution.
• Knowing the average project duration and the variances of activities allows the
probability of completing the project (or segment of the project) by a specific
time to be computed using standard statistical tables
54

PERT - Example
55
Activity Times
𝑡𝑒 =
𝑎 + 4𝑚 + 𝑏
6
=
17 + 4 ∗ 29 + 47
6
= 30
𝜎𝑡𝑒
2
= Τ
𝑏 − 𝑎 6 2 = Τ
47 − 17 6 2 = 25
1 2
3
4
5 6
13
20
16
6
5
30
Activity time ES EF LS LF
1-2 30 0 30 0 30
2-3 13 30 43 30 43
2-4 20 30 50 33 53
3-5 16 43 59 43 59
4-5 6 50 56 53 59
5-6 5 59 64 59 64
Total Time = 64
Variance

PERT - Example
• what is the probability the project will be completed
before a scheduled time (TS) of 67?
• Probability of completing the project by time period
60
56
𝑍 =
𝑇𝑆 − 𝑇𝐸
σ 𝜎𝑡𝑒
2
=
67 − 64
25 + 9 + 1 + 1
=
+3
36
= +0.50
P = 0.69
𝑍 =
𝑇𝑆 − 𝑇𝐸
σ 𝜎𝑡𝑒
2
=
60 − 64
25 + 9 + 1 + 1
=
−4
36
= −0.67
P ≈ 0.26

Cost–Time Trade-Offs and Project Crashing
• It is common to face the following
situations:
• The project is behind schedule
• The completion time has been moved
forward
• Shortening the duration of the project is
called project crashing
• Factors to Consider When Crashing a
Project
• The amount by which an activity is crashed
is, in fact, permissible
• Taken together, the shortened activity
durations will enable us to finish the project
by the due date
• The total cost of crashing is as small as
possible
60

Steps in Project Crashing
61
Step 1: Compute the crash cost per time period. If crash costs are linear over
time:
Crash cost
per period =
(Crash cost – Normal cost)
(Normal time – Crash time)
Step 2: Using current activity times, find the critical path and identify the
critical activities
Step 3: If there is only one critical path, then select the activity on this critical path
that (a) can still be crashed, and (b) has the smallest crash cost per period.
If there is more than one critical path, then select one activity from each
critical path such that (a) each selected activity can still be crashed, and (b)
the total crash cost of all selected activities is the smallest.
Note that the same activity may be common to more than one critical path.
Step 4: Update all activity times. If the desired due date has been reached, stop. If
not, return to Step 2.

Project Crashing – Example 1
• Project costs are $1,000 per day.
62

• Step 1: Determine which activities are on the critical path, its length, and the
length of the other path:
• Step 2: Rank the critical path activities in order of lowest crashing cost, and
determine the number of days each can be crashed.
Note: Available days = Normal time – Crash time.
63
Path Length
a–b–f 18
c–d–e–f 20 (Critical Path)
Activity Crash cost per day Available Days
c $300 1
e $600 2
d $700 3
f $800 1

• Step 3: Begin shortening the project, one day at a time, and check after each
reduction to see which path is critical. (After a certain point, another path may
equal the length of the shortened critical path.) Thus:
1. Shorten activity c one day at a cost of $300. The length of the critical path now becomes
19 days.
64
Path Activity Available Days Total Crash Cost Crash cost per day
a–b–f (18) a -
= $ 300
No reduction possible
b 2 $500
f 1 $800
c–d–e–f (19) c 0 No further reduction possible
d 3 $700
e 2 $600
f 1 $800

2. Activity c cannot be shortened any more. Shorten activity e one day at a cost of $600. The
length of path c–d–e–f now becomes 18 days, which is the same as the length of path a–
b–f.
65
a–b–f (18) a -
= $ 300 + $ 600
= $ 900
b 2 $500
f 1 $800
d 3 $700
e 1 $600
f 1 $800

3. The paths are now both critical; further improvements will necessitate shortening both
paths.
66
a–b–f (17) a -
= $ 300 + $ 600 +
$ 800
=$ 1700
b 2 $500
f 0 No further reduction possible
d 3 $700
e 1 $600
f 0 No further reduction possible

4. At this point, no additional improvement is feasible. The cost to crash b is $500 and the
cost to crash e is $600, for a total of $1,100, and that would exceed the indirect project
costs of $1,000 per day.
5. The crashing sequence is summarized as follows:
67

68

Project Management Software
• There are several popular packages for managing projects
• Oracle Primavera
• MindView
• HP Project
• Fast Track
• Microsoft Project
69
Source: https://www.youtube.com/watch?v=tFtQJK8yDIk

Dr. K N Reddy Indian Institute of Management Jammu 70

Any Questions???
71

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