17-1 Project Management

Operations Management

William J. Stevenson

8th edition
 17-2 Project Management

CHAPTER
17

Project
Management

Operations Management, Eighth Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
17-3 Project Management

Projects

JAN FEB MAR APR MAY JUN

Build A

A Done

Build B

B Done

Build C

C Done
On time!
Build D

Ship

Unique, one-time operations designed to accomplish

a specific set of objectives in a limited time frame.
17-4 Project Management

Project Management

 How is it different?
 Limited time frame
 Narrow focus, specific objectives

 Less bureaucratic

 Why is it used?
 Special needs
 Pressures for new or improves products or
services
17-5 Project Management

Project Management

 What are the Key Metrics

 Time
 Cost
 Performance objectives
 What are the Key Success Factors?
 Top-down commitment
 Having a capable project manager
 Having time to plan
 Careful tracking and control
 Good communications
17-6 Project Management

Project Management

 What are the Major Administrative Issues?

 Executive responsibilities
 Project selection
 Project manager selection
 Organizational structure
 Organizational alternatives
 Manage within functional unit
 Assign a coordinator
 Use a matrix organization with a project leader
17-7 Project Management

Project Management

 What are the tools?

 Work breakdown structure
 Network diagram

 Gantt charts

 Risk management
17-8 Project Management

Planning and Scheduling

Gantt Chart MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Locate new
facilities

Interview staff

Hire and train staff

Select and order

furniture

Remodel and install

phones

Move in/startup
17-9 Project Management

Key Decisions

 Deciding which projects to implement

 Selecting a project manager
 Selecting a project team
 Planning and designing the project
 Managing and controlling project resources
 Deciding if and when a project should be
terminated
17-10 Project Management

Project Manager

Responsible for:

Work Quality
Human Resources Time
Communications Costs
17-11 Project Management

Ethical Issues

 Temptation to understate costs

 Withhold information
 Misleading status reports
 Falsifying records
 Comprising workers’ safety
 Approving substandard work
17-12 Project Management

Project Life Cycle

Feasibility

Management
Planning
Concept
Execution

Termination
17-13 Project Management

Work Breakdown Structure

Figure 17.2

Project X

Level 1

Level 2

Level 3

Level 4
17-14 Project Management

PERT and CPM

PERT: Program Evaluation and

Review Technique
CPM: Critical Path Method

 Graphically displays project activities

 Estimates how long the project will take
 Indicates most critical activities
 Show where delays will not affect project
17-15 Project Management

The Network Diagram

 Network (precedence) diagram

 Activity-on-arrow (AOA)
 Activity-on-node (AON)
 Activities
 Events
17-16 Project Management

The Network Diagram (cont’d)

 Path
 Sequence of activities that leads from the starting
node to the finishing node
 Critical path
 The longest path; determines expected project
duration
 Critical activities
 Activities on the critical path
 Slack
 Allowable slippage for path; the difference the
length of path and the length of critical path
17-17 Project Management

Project Network – Activity on Arrow

Figure 17.4
Order
AOA furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move
in
Interview
Hire and
train
3
17-18 Project Management

Project Network – Activity on Node

Figure 17.4
Order
furniture
Locate Furniture
2 setup
facilities
AON
1 6
Move
Remodel
in

S 5 7

Hire and
Interview
train

3 4
17-19 Project Management

Example 1
Figure 17.5

6 weeks
Deterministic 4
time estimates
3 weeks
8 weeks 2

11 weeks Move
in
1 5 6
1 week

4 weeks
9 weeks

3
17-20 Project Management

Example 1 Solution

Critical Path

Path Length Slack

(weeks)
1-2-3-4-5-6 18 2
1-2-5-6 20 0
1-3-5-6 14 6
17-21 Project Management

Computing Algorithm

 Network activities
 ES: early start
 EF: early finish
 LS: late start
 LF: late finish
 Used to determine
 Expected project duration
 Slack time
 Critical path
17-22 Project Management

Time-cost Trade-offs: Crashing

 Crash – shortening activity duration

 Procedure for crashing
 Crash the project one period at a time
 Only an activity on the critical path
 Crash the least expensive activity
 Multiple critical paths: find the sum of
crashing the least expensive activity on each
critical path
17-23 Project Management

Project Crashing

 Crashing a project involves paying more

money to complete a project more quickly.
 Since the critical path determines the length of
a project, it makes sense to reduce the length
of activities on the critical path.
 CP activities should be reduced until the
project is reduced to the desired length or you
are paying more per day than you save.
 If you have multiple CPs, they should be
shortened simultaneously.
17-24 Project Management

Time-Cost Trade-Offs: Crashing

Figure 17.11

Total
cost

Expected indirect costs

Shorten

Cumulative CRASH
cost of
crashing
Shorten

Optimum
17-25 Project Management

Example 7

2
f

4
d
17-26 Project Management

Advantages of PERT

 Forces managers to organize

 Provides graphic display of activities
 Identifies
4
 Critical activities
2
 Slack activities
1 5 6

3
17-27 Project Management

Limitations of PERT

 Important activities may be omitted

 Precedence relationships may not be correct
 Estimates may include 4

a fudge factor 2

 May focus solely

on critical path 1 5 6

142 weeks

3
17-28 Project Management

Technology for Managing Projects

 Computer aided design (CAD)

 Groupware (Lotus Notes)

 Project management software

 CA Super Project
 Harvard Total Manager

 MS Project

 Sure Track Project Manager

 Time Line
17-29 Project Management

Advantages of PM Software

 Imposes a methodology
 Provides logical planning structure
 Enhances team communication
 Flag constraint violations
 Automatic report formats
 Multiple levels of reports
 Enables what-if scenarios
 Generates various chart types
17-30 Project Management

Project Risk Management

 Risk: occurrence of events that have

undesirable consequences
 Delays
 Increased costs
 Inability to meet specifications
 Project termination
17-31 Project Management

Risk Management

 Identify potential risks

 Analyze and assess risks
 Work to minimize occurrence of risk
 Establish contingency plans
17-32 Project Management

Summary

 Projects are a unique set of activities

 Projects go through life cycles
 PERT and CPM are two common techniques
 Network diagrams
 Project management software available
17-33 Project Management

CHAPTER
17
Additional PowerPoint slides
contributed by
Geoff Willis,
University of Central Oklahoma.
17-34 Project Management

Projects — Concepts

PM1
Definition/Example Alton Bridge