Project Management

What is a Project Management?

Project: a series of related activities usually directed toward some major output and requiring a significant period of time to perform Project management: the application of the knowledge, skills, tools, and techniques necessary to successfully complete a project. According to the Project Management Institute (www.pmi.org), the body of knowledge of project management can be divided into five categories:
1. initiation 2. planning 3. execution 4. control 5. closure

Characteristics of a Project
A unique, one-time effort Requires the completion of a large number of interrelated activities Resources, such as time and/or money, are limited Typically has its own management structure

Characteristics for Projects

Projects generally have or include:

Pre-specified deliverables after completion Pre-established limits and exclusions Specific intermediate goals or performance milestones. An element of risk Teams made up of several individuals who come from different departments or functional areas or who have unique skills Team members work on multiple projects at the same time

Example Projects in Different Functional Areas that Impact the Value Chain

Matrix Project

Three Interrelated Constraints in Project Management

All project management decisions involve three factors: time, resources, and cost

Project Management Tools and Techniques

The discipline of project management has a number of tools and procedures that enable the project team to organize its work to meet the objectives under the constraints:
Work Breakdown Structure Precedence Relationship and Time Estimates Gantt Chart Network Diagram Critical Path Method (CPM) Cost and Time Tradeoff Analysis Program Evaluation and Review Technique (PERT) Resource Management

Work Breakdown Structure

Work breakdown structure (WBS): an approach that defines a project in terms of its subprojects, tasks, and activities
Most fundamental technique for designing and organizing

Activity: the smallest work package that can be assigned to a single worker or a team It is essential that care is taken to develop a realistic work breakdown structure.

Precedence Relationship and Time Estimates

Precedence relationship analysis: identification of the relationships and the sequence of activities within a project Great care is taken to estimate the approximate completion time for each activity. The project schedule, cost, and resource requirements depend on the precedence relationships and time estimates for individual tasks.

Gantt Chart
Gantt chart: a special type of horizontal bar chart used to display the schedule for an entire project Named after Henry Gantt, who originally developed the chart in the 1910s. A Gantt chart with different color codes can be used to track performance while the project is in progress.

An Example of a Gantt Chart

Network Diagram
Network diagram: a diagram with arrows and nodes (circles) created to display a sequence of activities within a project Activity on node (AON) approach: a network diagram that shows each activity as a circle (or a node) and connects the activities with arrows Activity on arrow (AOA) convention: a network diagram in which each activity is represented by an arrow, and the nodes are used to show the beginning and end points

Activity on Node (AON) and Activity on Arrow (AOA) Conventions for Representing Network Diagrams

Types of Critical Path Methods

CPM - Used when activity times are known with certainty

Used to determine timing estimates for the project, each activity in the project, and slack time for activities
PERT with Three Activity Time Estimates

Used when activity times are uncertain Used to obtain the same information as the Single Time Estimate model and probability information
Time-Cost Models

Used when cost trade-off information is a major consideration in planning Used to determine the least cost in reducing total project time

Critical Path Method

Critical path method: an algorithm for scheduling activities within a project for the fastest and most efficient execution Critical path: the path within a project that takes the longest time to complete
Dictates the project completion time, the bottleneck path or the binding constraint

Critical activities: the project activities making up a critical path Slack: the amount of flexibility in scheduling an activity within a project

Computing the Critical Path

Earliest start (ES) = 0 for all activities without predecessors; = largest of earliest finish times of all immediate predecessor activities. Earliest finish (EF) = ES + task duration, working forward in the project network Latest finish (LF) = for all ending activities = minimum project duration; = smallest of latest start times for all successor activities. Latest start (LS) = LF - task duration, working backwards in the project network

CPM with Single Time Estimate

Consider the following consulting project:

Activity Assess customer's needs Write and submit proposal Obtain approval Develop service vision and goals Train employees Quality improvement pilot groups Write assessment report Designation Immed. Pred. Time (Weeks) A None 2 B A 1 C B 1 D C 2 E C 5 F D, E 5 G F 1

Develop a critical path diagram and determine the duration of the critical path and slack times for all activities.

First draw the network

Act. A B C D E Imed. Pred. Time None A B C C 2 1 1 2 5

F
G

D,E
F

5
1

D(2)

A(2)

B(1)

C(1)

F(5)

G(1)

E(5)

Determine early starts and early finish times

ES=4 EF=6 ES=0 EF=2 A(2) ES=2 EF=3 B(1) ES=3 EF=4 C(1) ES=4 EF=9
Hint: Start with ES=0 and go forward in the network from A to G.

D(2)

ES=9 EF=14 F(5)

ES=14 EF=15 G(1)

E(5)

Determine late starts and late finish times

ES=4 EF=6 D(2) LS=7 LF=9 ES=4 EF=9 E(5) LS=4 LF=9

ES=0 EF=2 A(2) LS=0 LF=2

ES=2 EF=3 B(1) LS=2 LF=3

ES=3 EF=4 C(1) LS=3 LF=4

Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A. ES=9 ES=14 EF=14 EF=15 F(5) LS=9 LF=14 G(1) LS=14 LF=15

Critical Path & Slack ES=4 EF=6

Slack=(7-4)=(9-6)= 3 Wks

ES=0 EF=2
A(2) LS=0 LF=2

ES=2 EF=3
B(1) LS=2 LF=3

ES=3 EF=4
C(1) LS=3 LF=4

D(2)

LS=7 LF=9 ES=4 EF=9

E(5) LS=4 LF=9

ES=9 EF=14 F(5) LS=9 LF=14

ES=14 EF=15 G(1) LS=14 LF=15

Duration=15 weeks

Program Evaluation and Review Technique (PERT)

The technique is based on the assumption that an activitys duration follows a probability distribution instead of being a single value. The probabilistic information about the activities is translated into probabilistic information about the project.

PERT
Three time estimates are required to compute the parameters of an activitys duration distribution:
pessimistic time (tp ) - the time the activity would take if things do not go well most likely time (tm ) - the consensus best estimate of the activitys duration optimistic time (to ) - the time the activity would take if things do go well

PERT
From these three time estimates about an activity, two probability distribution parameters are calculated: the mean (te ) and the variance (Vt ).
te = ( to + 4tm + tp ) / 6

Vt = [ ( tp - to ) / 6 ] 2

Example: PERT

Immediate Task Predecesors Optimistic Most Likely Pessimistic A None 3 6 15 B None 2 4 14 C A 6 12 30 D A 2 5 8 E C 5 11 17 F D 3 6 15 G B 3 9 27 H E,F 1 4 7 I G,H 4 19 28

Example. Expected Time Calculations

ET(A)= 3+4(6)+15
Task A B C D E F G H I Immediate Expected Predecesors Time None 7 None 5.333 A 14 A 5 C 11 D 7 B 11 E,F 4 G,H 18

6
ET(A)=42/6=7
Immediate Task Predecesors Optimistic Most Likely Pessimistic A None 3 6 15 B None 2 4 14 C A 6 12 30 D A 2 5 8 E C 5 11 17 F D 3 6 15 G B 3 9 27 H E,F 1 4 7 I G,H 4 19 28

Expected Time =

Opt. Time + 4(M ost Likely Time) + Pess. Time 6

Network Diagram
Duration = 54 Days

C(14)
A(7)

E(11)
H(4)

D(5)

F(7)
I(18)

B
(5.333)

G(11)

Exercise
What is the probability of finishing this project in less than 53 days?

p(t < D) D=53 TE = 54

Z = D - TE

2 cp

A ctiv ity v arian ce,

P essim . - O p tim . 2 = ( ) 6

Task A B C D E F G H I

Optimistic Most Likely Pessimistic Variance 3 6 15 4 2 4 14 6 12 30 16 2 5 8 5 11 17 4 3 6 15 3 9 27 1 4 7 1 4 19 28 16

(Sum the variance along the critical path.)

= 41

p(t < D)

t
D=53 TE = 54

Z =

D - TE

cp 2

53 - 54 = = -.156 41

p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156) There is a 43.8% probability that this project will be completed in less than 53 weeks.

Additional Probability Exercise

What is the probability that the project duration will exceed 56 weeks?

Additional Exercise Solution

p(t < D) t

TE = 54

D=56

Z =

D - TE

cp 2

56 - 54 = = .312 41

p(Z > .312) = .378, or 37.8 % (1-NORMSDIST(.312))

Activity Cost-Time Tradeoffs

Project managers may have the option or requirement to crash the project, or accelerate the completion of the project. This is accomplished by reducing the length of the critical path(s). The length of the critical path is reduced by reducing the duration of the activities on the critical path

Chapter 18 Project Management

Crashing a project refers to reducing the total time to complete the project to meet a revised due date. Crash time is the shortest possible time the activity can realistically be completed. Crash cost is the total additional cost associated with completing an activity in its crash time rather than in normal time.

Crash cost per unit of time =

Crash Cost Normal Cost Normal Time Crash Time

Activity crashing

Crash cost

Crashing activity Slope = crash cost per unit time

Normal Activity Normal cost

Normal time
Crash time Activity time

Crashing - Considerations
Pick activities on the Critical Path Determine Crash/Day costs Start with lowest cost crash/day Determine other effects of shortening critical path activities Continue to crash/analyze until optimum solution reached. Analyze Project Cost/Duration Graph

Computer Software for Project Management

Artemis Views (Artemis Management Systems) FastTrack Schedule (AEC Software) Microsoft Project (Microsoft Corp.) Oracle Projects (Oracle Corp.) PowerProject (ASTA Development) Primavera Project Planner (Primavera Systems) SuperProject (Computer Associates International) TurboProject (IMSI)