Chapter 9

Project Management
Operations Management - 5th Edition
Roberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.

Beni Asllani University of Tennessee at Chattanooga

Lecture Outline
Project Planning Project Scheduling Project Control CPM/PERT Probabilistic Activity Times Project Crashing and Time-Cost Trade-off
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What is a Project?
Project

unique, one-time operational activity or effort

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

Examples

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Project Elements
Objective Scope Contract requirements Schedules Resources Personnel Control Risk and problem analysis
9-4

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Project Management Process

Project planning Project scheduling Project control Project team

made up of individuals from various areas and departments within a company a team structure with members from functional areas, depending on skills required

Matrix organization

Project Manager

most important member of project team

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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

breaks down a project into components, subcomponents, activities, and tasks
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Work breakdown structure

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Work Breakdown Structure for Computer Order Processing System Project

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 Organizational Breakdown Structure

a chart that shows which organizational units are responsible for work items shows who is responsible for work in a project

Responsibility Assignment Matrix

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Project Scheduling
Steps

Techniques

Define activities Sequence activities Estimate time Develop schedule

Gantt chart CPM PERT Microsoft Project

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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

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Example of Gantt Chart

0
Activity Design house and obtain financing Lay foundation Order and receive materials Build house

Month 4

10

Select paint
Select carpet Finish work

3 Month

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Project Control
Time management Cost management Quality management Performance management

Earned Value Analysis

a standard procedure for numerically measuring a projects progress, forecasting its completion date and cost and measuring schedule and budget variation

Communication Enterprise project management

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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
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Project Network
Activity-on-node (AON)

nodes represent activities, and arrows show precedence relationships

1

Node
2 3

Activity-on-arrow (AOA)

arrows represent activities and nodes are events for points in time completion or beginning of an activity in a project

Event

Branch

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AOA Project Network for a House

3
2 0

Lay foundation

Dummy

3
Design house and obtain financing

1
Order and receive materials

Build house

Finish work

4
Select paint 1

3 1

6
Select carpet

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Concurrent Activities
Lay foundation

3
Lay foundation Dummy 2 1 Order material (b) Correct precedence relationship 0

3 2

Order material

(a) Incorrect precedence relationship

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AON Network for House Building Project

Lay foundations Build house

2 2 Start 1 3 3 1 5 1

4 3

Finish work

7 1 6 1
Select carpet

Design house and obtain financing

Order and receive materials

Select paint

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Critical Path
2 2 Start 1 3 3 1 5 1 6 1 4 3 7 1

A: B: C: D:

1-2-4-7 3 + 2 + 3 + 1 = 9 months 1-2-5-6-7 3 + 2 + 1 + 1 + 1 = 8 months 1-3-4-7 3 + 1 + 3 + 1 = 8 months 1-3-5-6-7 3 + 1 + 1 + 1 + 1 = 7 months

Critical path

Longest path through a network Minimum project completion time

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Activity Start Times

Start at 5 months

2 2
Start

4 3

Finish at 9 months

1 3 3 1
Start at 3 months

7 1 6 1
Start at 6 months

Finish

5 1

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Mode Configuration
Activity number Earliest start

Earliest finish

1
3

0
0

3
3
Latest finish

Activity duration

Latest start

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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 time an activity can finish earliest start time plus activity time

Earliest finish time (EF)

EF= ES + t

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Earliest Activity Start and Finish Times

Lay foundations

Build house
Start

2 2 1 1 0 3

5 4 3 5 8

7
1 6 3 3 4 5 1
Select pain

Design house and obtain financing

Finish work

1 5 6
Select carpet

1
Order and receive materials

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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

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Latest Activity Start and Finish Times

Lay foundations Build house Start

2
2 1 0 3

3
3

5
5 4 3 5 5 8 8 7 8 9

3
6 3 1 3 4 4 5 1 6 7 7 8

Design house and obtain financing

Finish work

5
1

5
6

6
7
Select carpet

Order and receive materials

Select pain

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Activity Slack
Activity
*1 *2 3 *4 5 6 *7

LS
0 3 4 5 6 7 8

ES
0 3 3 5 5 6 8

LF
3 5 5 8 7 8 9

EF
3 5 4 8 6 7 9

Slack S
0 0 1 0 1 1 0

* Critical Path

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Probabilistic Time Estimates

Beta distribution

a probability distribution traditionally used in CPM/PERT a + 4m + b Mean (expected time): t= 6 Variance: where a = optimistic estimate m = most likely time estimate b = pessimistic time estimate

b-a = 6

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Examples of Beta Distributions

P(time) P(time)

t
Time

a
Time

P(time)

a
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m=t
Time

b
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Project Network with Probabilistic Time Estimates: Example

Equipment installation

1
6,8,10 System development

Equipment testing and modification System training Final debugging 10 1,4,7 11

2,4,12

8
Manual testing 3,7,11

Start

2
3,6,9 Position recruiting

Finish

5
2,3,4 Job Training

9
2,4,6 System testing

1,10,13 System changeover

3
1,3,5

6
3,4,5 Orientation

7
2,2,2

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Activity Time Estimates

TIME ESTIMATES (WKS) ACTIVITY MEAN TIME VARIANCE

a 6 3 1 2 2 3 2 3 2 1 1

m 8 6 3 4 3 4 2 7 4 4 10

b 10 9 5 12 4 5 2 11 6 7 13

t 8 6 3 5 3 4 2 7 4 4 9

2 0.44 1.00 0.44 2.78 0.11 0.11 0.00 1.78 0.44 1.00 4.00

1 2 3 4 5 6 7 8 9 10 11

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Activity Early, Late Times, and Slack

ACTIVITY

t 8 6 3 5 3 4 2 7 4 4 9

0.44 1.00 0.44 2.78 0.11 0.11 0.00 1.78 0.44 1.00 4.00

ES

EF

LS

LF

1 2 3 4 5 6 7 8 9 10 11

0 0 0 8 6 3 3 9 9 13 16

8 6 3 13 9 7 5 16 13 17 25

1 0 2 16 6 5 14 9 12 21 16

9 6 5 21 9 9 16 16 16 25 25

1 0 2 8 0 2 11 0 3 8 0

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Earliest, Latest, and Slack

1 0 8 1
8

4 8 5 16 21 8 9 7 9 5 6 3 6
9 16

13

Critical Path
10 13 17

1 0

3
Finish

Start

2 0 6 0

16
11 16 25

9
7

3 0 3 2

6 3 4 5

9 9 13 4 12 16

9 16 25

7 3 5 2 14 16

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Total project variance 2 = 22 + 52 + 82 + 112 = 1.00 + 0.11 + 1.78 + 4.00 = 6.89 weeks

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Probabilistic Network Analysis

Determine probability that project is completed within specified time Z= where x-

= tp = project mean time = project standard deviation

x = proposed project time Z = number of standard deviations x is from mean

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Normal Distribution Of Project Time

Probability

= tp
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Time
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Southern Textile Example

What is the probability that the project is completed within 30 weeks?
P(x 30 weeks)

= 6.89 weeks
2

Z=
=

x-

6.89

= 2.62 weeks
= 25 x = 30
Time (weeks)

30 - 25 2.62

= 1.91
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
Copyright 2006 John Wiley & Sons, Inc. 9-35

Southern Textile Example

What is the probability that the project is completed within 22 weeks? x- 2 = 6.89 weeks Z= P(x 22 weeks)

6.89

= 2.62 weeks
x = 22 = 25

22 - 25 2.62

= -1.14
Time (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
Copyright 2006 John Wiley & Sons, Inc. 9-36

Project Crashing
Crashing

reducing project time by expending additional resources

an amount of time an activity is reduced cost of reducing activity time reduce project duration at minimum cost
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Crash time

Crash cost

Goal

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Project Crashing: Example

2 8 1
12

4
12

7 4
3 4 6 4

5 4

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Project Crashing: Example (cont.)

$7,000 $6,000
Crash cost

$5,000 $4,000

Crashed activity Slope = crash cost per week

$3,000
$2,000 $1,000
Crash time

Normal activity

Normal cost

Normal time

| 2

| 4

| 6

| 8

| 10

| 12

| 14

Weeks

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Normal Activity and Crash Data

NORMAL TIME (WEEKS) CRASH TIME (WEEKS) NORMAL COST CRASH COST TOTAL ALLOWABLE CRASH TIME (WEEKS) CRASH COST PER WEEK

ACTIVITY

1 2 3 4 5 6 7

12 8 4 12 4 4 4

7 5 3 9 1 1 3

$3,000 2,000 4,000 50,000 500 500 15,000

$5,000 3,500 7,000 71,000 1,100 1,100 22,000

5 3 1 3 3 3 1

$400 500 3,000 7,000 200 200 7,000

$75,000
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$110,700
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$500
2 8 1
12

$7000 4
12

$700 7 4 6 4 $200 $500 2 8

Project Duration: 36 weeks

FROM

$400

3 4 $3000

5 4 $200

$7000 4
12

$700

TO
Project Duration: 31 weeks Additional Cost: $2000

1
7

7 4
6 4 $200

$400

3 4

5 4 $200

$3000

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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

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Time-Cost Tradeoff
Minimum cost = optimal project time Total project cost Indirect cost Cost ($)

Direct cost Crashing Project duration Time

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