McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

1717

Project Management

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Learning ObjectivesLearning Objectives

Discuss the behavioral aspects of projects in terms of project personnel and the project manager.

Discuss the nature and importance of a work breakdown structure in project management.

Give a general description of PERT/CPM techniques.

Construct simple network diagrams.

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Learning ObjectivesLearning Objectives

List the kinds of information that a PERT or CPM analysis can provide.

Analyze networks with deterministic times. Analyze networks with probabilistic times. Describe activity “crashing” and solve

typical problems.

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Unique, one-time operations designed to Unique, one-time operations designed to accomplish a specific set of objectives in a limited accomplish a specific set of objectives in a limited time frame.time frame.

Build A

A Done

Build B

B Done

Build C

C Done

Build D

Ship

JAN FEB MAR APR MAY JUN

On time!

ProjectsProjects

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Project ManagementProject 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

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Project ManagementProject 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

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Project ManagementProject 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

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Project ManagementProject Management What are the tools?

Work breakdown structure Network diagram Gantt charts Risk management

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Planning and SchedulingPlanning and Scheduling

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

Gantt Chart

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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

Key DecisionsKey Decisions

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Project ManagerProject Manager

Responsible for:

Work QualityHuman Resources TimeCommunications Costs

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Temptation to understate costs

Withhold information Misleading status reports

Falsifying records Comprising workers’ safety

Approving substandard work

Ethical IssuesEthical Issues

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Project Life CycleProject Life Cycle

Concept

Feasibility

Planning

Execution

Termination

Managem

ent

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Work Breakdown StructureWork Breakdown Structure

Project X

Level 1

Level 2

Level 3

Level 4

Figure 17.2

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PERT and CPMPERT 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

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The Network DiagramThe Network Diagram Network (precedence) diagram – diagram of

project activities that shows sequential relationships by the use of arrows and nodes.

Activity-on-arrow (AOA) – a network diagram convention in which arrows designate activities.

Activity-on-node (AON) – a network diagram convention in which nodes designate activities.

Activities – steps in the project that consume resources and/or time.

Events – the starting and finishing of activities, designated by nodes in the AOA convention.

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The Network Diagram (cont’d)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

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Project Network – Activity on Project Network – Activity on ArrowArrow

1

2

3

4

5 6

Locatefacilities

Orderfurniture

Furnituresetup

InterviewHire andtrain

Remodel

Move in

Figure 17.4

AOA

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Project Network – Activity on Project Network – Activity on NodeNode

1

2

3

5

6

Locatefacilities

Orderfurniture

Furnituresetup

Interview

Remodel Move in

4

Hire andtrain

7S

Figure 17.4

AON

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Network ConventionsNetwork Conventions

a

b

c ab

c

a

b

c

d

a

b

c

Dummyactivity

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Time EstimatesTime Estimates

Deterministic Time estimates that are fairly certain

Probabilistic Estimates of times that allow for variation

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Example 1Example 1

1

2

3

4

5 6

8 weeks

6 weeks

3 weeks

4 weeks9 weeks

11 weeks

1 week

Locate

facilities

Order

furniture Furniture

setup

InterviewHire and tra

in

Remodel Move in

DeterministicDeterministictime estimatestime estimates

Figure 17.5

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Example 1 SolutionExample 1 Solution

P a t h L e n g t h( w e e k s )

S l a c k

1 - 2 - 3 - 4 - 5 - 61 - 2 - 5 - 61 - 3 - 5 - 6

1 82 01 4

206

Critical Path

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Network activities ES: early start EF: early finish LS: late start LF: late finish

Used to determine Expected project duration Slack time Critical path

Computing AlgorithmComputing Algorithm

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Probabilistic Time EstimatesProbabilistic Time Estimates

Optimistic time Time required under optimal conditions

Pessimistic time Time required under worst conditions

Most likely time Most probable length of time that will be

required

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Probabilistic EstimatesProbabilistic Estimates

Activitystart

Optimistictime

Most likelytime (mode)

Pessimistictime

to tptm te

Figure 17.8

Beta Distribution

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Expected TimeExpected Time

te = to + 4tm +tp

6

te = expected timeto = optimistic timetm = most likely timetp = pessimistic time

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VarianceVariance

(tp – to)2

36

= varianceto = optimistic timetp = pessimistic time

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Example 5Example 5

1-3-4a

3-4-5d

3-5-7e

5-7-9f

2-4-6b

4-6-8h

2-3-6g 3-4-6

i

2-3-5c

Optimistictime

Most likelytime

Pessimistictime

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Example 5 Time EstimatesExample 5 Time Estimates

2.83a

4.00d

5.0e

7.0f

4.00b

6.0h

3.33g 4.17

i

3.17c

Tabc = 10.0Tdef = 16.0Tghi = 13.50

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Path ProbabilitiesPath Probabilities

Z = Specified time – Path meanPath standard deviation

Z indicates how many standard deviationsof the path distribution the specified tineis beyond the expected path duration.

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17Weeks

Weeks

Weeks

Weeks

10.0

16.0

13.5

1.00

1.00

a-b-c

d-e-f

g-h-i

Example 6Example 6

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Time-cost Trade-offs: CrashingTime-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

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Time-Cost Trade-Offs: CrashingTime-Cost Trade-Offs: Crashing

Totalcost

Shorten

Shorten

Cumulativecost of crashing

Expected indirect costs

Optimum

CRASH

Figure 17.11

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6a

4d

5c

10b

9 e

2f

Example 7Example 7

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Advantages of PERTAdvantages of PERT

Forces managers to organize Provides graphic display of activities Identifies

Critical activities Slack activities 1

2

3

4

5 6

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Limitations of PERTLimitations of PERT

Important activities may be omitted Precedence relationships may not be

correct Estimates may include

a fudge factor May focus solely

on critical path1

2

3

4

5 6

142 weeks

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Goldratt’s Critical ChainGoldratt’s Critical Chain

Goldratt’s insight on project management Time estimates are often pessimistic Activities finished ahead of schedule often go

unreported With multiple projects, resources needed for one

project may be in use on another

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Computer aided design (CAD) Groupware (Lotus Notes) CA Super Project Harvard Total Manager MS Project Sure Track Project Manager Time Line

Project Management SoftwareProject Management Software

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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

Advantages of PM SoftwareAdvantages of PM Software

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Risk: occurrence of events that have undesirable consequences Delays Increased costs Inability to meet specifications Project termination

Project Risk ManagementProject Risk Management

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Identify potential risks

Analyze and assess risks Work to minimize occurrence of risk

Establish contingency plans

Risk ManagementRisk Management

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SummarySummary

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

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Video: Work BreakdownVideo: Work Breakdown

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Video: Project Materials/DelaysVideo: Project Materials/Delays

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Video: Project SchedulingVideo: Project Scheduling

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Video: PERT/CPMVideo: PERT/CPM