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Chapter 3

Project Management

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A Project is a series of related jobs usually directed toward some major output and requiring a significant period of time to perform

Project Management is the management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project

Project Management Defined

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Gantt Chart

Activity 1Activity 2Activity 3Activity 4Activity 5Activity 6

Time

Vertical Axis: Always Activities or Jobs

Vertical Axis: Always Activities or Jobs

Horizontal Axis: Always TimeHorizontal Axis: Always Time

Horizontal bars used to denote length of time for each activity or job.

Horizontal bars used to denote length of time for each activity or job.

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Structuring Projects Pure Project: Advantages

Pure Project

A pure project is where a self-contained team works full-time on the project

• The project manager has full authority over the project

• Team members report to one boss• Shortened communication lines• Team pride, motivation, and commitment

are high

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Structuring Projects Pure Project: Disadvantages

• Duplication of resources• Organizational goals and policies

are ignored• Lack of technology transfer• Team members have no functional

area "home"

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Functional Project

President

Research andDevelopment

Engineering Manufacturing

ProjectA

ProjectB

ProjectC

ProjectD

ProjectE

ProjectF

ProjectG

ProjectH

ProjectI

A functional project is housed within a functional division

Example, Project “B” is in the functional area of Research and Development.

Example, Project “B” is in the functional area of Research and Development.

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Structuring Projects Functional Project: Advantages

• A team member can work on several projects

• Technical expertise is maintained within the functional area

• The functional area is a “home” after the project is completed

• Critical mass of specialized knowledge

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Structuring Projects Functional Project: Disadvantages

• Aspects of the project that are not directly related to the functional area get short-changed

• Motivation of team members is often weak

• Needs of the client are secondary and are responded to slowly

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Matrix Project Organization Structure

President

Research andDevelopment

Engineering Manufacturing Marketing

ManagerProject A

ManagerProject B

ManagerProject C

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Structuring Projects Matrix: Advantages

• Enhanced communications between functional areas

• Pinpointed responsibility

• Duplication of resources is minimized

• Functional “home” for team members

• Policies of the parent organization are followed

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Structuring Projects Matrix: Disadvantages

• Too many bosses

• Depends on project manager’s negotiating skills

• Potential for sub-optimization

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Work Breakdown Structure

Program

Project 1 Project 2

Task 1.1

Subtask 1.1.1

Work Package 1.1.1.1

Level

1

2

3

4

Task 1.2

Subtask 1.1.2

Work Package 1.1.1.2

A work breakdown structure defines the hierarchy of project tasks, subtasks, and work packages

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Network-Planning Models

• A project is made up of a sequence of activities that form a network representing a project

• The path taking longest time through this network of activities is called the “critical path”

• The critical path provides a wide range of scheduling information useful in managing a project

• Critical Path Method (CPM) helps to identify the critical path(s) in the project networks

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Prerequisites for Critical Path Methodology

A project must have:

well-defined jobs or tasks whose completion marks the end of the project;

independent jobs or tasks;

and tasks that follow a given sequence.

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Steps in the CPM with Single Time Estimate

• 1. Activity Identification

• 2. Activity Sequencing and Network Construction

• 3. Determine the critical path– From the critical path all of the

project and activity timing information can be obtained

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CPM with Single Time Estimate

Consider the following consulting project:

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

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

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First draw the network

A None 2

B A 1

C B 1

D C 2

E C 5

F D,E 5

G F 1

Act. Imed. Pred. Time

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Sensitivity Analysis

• What if something goes wrong?

• Can you still be able to finish the project as planned?

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Example 2. CPM with Three Activity Time Estimates

TaskImmediate

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

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Example 2. Expected Time Calculations

ET(A)= 3+4(6)+15

6

ET(A)= 3+4(6)+15

6

ET(A)=42/6=7ET(A)=42/6=7Task

Immediate Predecesors

Expected Time

A None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

TaskImmediate

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

Expected Time = Opt. Time + 4(Most Likely Time) + Pess. Time

6Expected Time =

Opt. Time + 4(Most Likely Time) + Pess. Time

6

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Example 2. Network

A(7)

B(5.333)

C(14)

D(5)

E(11)

F(7)

H(4)

G(11)

I(18)

Duration = 54 Days

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Activity variance, = (Pessim. - Optim.

6)2 2Activity variance, = (

Pessim. - Optim.

6)2 2

Task Optimistic Most Likely Pessimistic VarianceA 3 6 15 4B 2 4 14C 6 12 30 16D 2 5 8E 5 11 17 4F 3 6 15G 3 9 27H 1 4 7 1I 4 19 28 16

(Sum the variance along the critical path.)

2 = 41 2 = 41

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Example 2. Probability Exercise

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

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

p(t < D)

TE = 54

Z = D - TE

cp2

Z = D - TE

cp2

tD=53

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Example 2. Additional Exercise Solution

tTE = 54

p(t < D)

D=56

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Time-Cost Trade-offs

-Activity crashing: reduce activity

times to complete a project earlier (at

a cost, of course)

-To reduce project completion time:

• Focus on the critical activities!!

• Be careful!! When you reduce the critical

path, it may no longer be the critical path

anymore. Check it again!!

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Crashing Example

A7

B6

C4

D8

E10

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Crashing example

• Q: By how many days can I expedite this project if I had a budget of $24?

Activity Avg. Time

Crash time

Normal cost

Crash cost

Cost per day to expedite

# of days an

activity may be

shortened

A 7 5 $70 100 (100-70)/2=15 2

B 6 3 60 80 (80-60)/3=6.67 3

C 4 2 40 60 (60-40)/2=10 2

D 8 6 80 120 (120-80)/2=20 2

E 10 7 10 40 (40-19)/3=10 3

1-28McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved

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Project completion

time

Critical path

Cost of expediting

Least expensive

activity

Cost of LEA