Chapter 9
Project Management
Lecture Outline
• Project Planning
• Project Scheduling
• Project Control
• CPM/PERT
• Probabilistic Activity Times
• Microsoft Project
• Project Crashing and Time-Cost Trade-off
Copyright 2011 John Wiley & Sons, Inc. 9-2
Project Management Process
Project• unique, one-time operational activity or effort
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Project Management ProcessCopyright 2011 John Wiley & Sons, Inc.
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Project Management Process
9-5
Project Elements
Objective Scope Contract requirements Schedules Resources Personnel Control Risk and problem analysis
9-6
Project Team and Project Manager
• Project team• made up of individuals from various areas and
departments within a company
• Matrix organization• a team structure with members from functional areas,
depending on skills required
• Project manager• most important member of project team
9-7
Scope Statement
• 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
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Work Breakdown Structure
• Work breakdown structure (WBS)• Breaks a project into components,
subcomponents, activities, and tasks
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Copyright 2011 John Wiley & Sons, Inc. 9-10
Work Breakdown Structure for Computer Order Processing System Project
Work Breakdown Structure for Computer Order Processing System Project
Responsibility Assignment Matrix
• Organizational Breakdown Structure (OBS)• a chart that shows which organizational units are
responsible for work items
• Responsibility Assignment Matrix (RAM)• shows who is responsible for work in a project
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9-12
Responsibility Assignment Matrix
Global and Diversity Issues in Project Management
• Global project teams are formed from different genders, cultures, ethnicities, etc.
• Diversity among team members can add an extra dimension to project planning
• Cultural research and communication are important elements in the planning process
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Project Scheduling Steps
Define activities Sequence activities Estimate time Develop schedule
Techniques Gantt chart CPM/PERT
Software Microsoft Project
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Gantt Chart
Graph or bar chart Bars represent the time for each task Bars also indicate status of tasks 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
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| | | | |Activity
Design house and obtain financing
Lay foundation
Order and receive materials
Build house
Select paint
Select carpet
Finish work
0 2 4 6 8 10Month
Month1 3 5 7 9
Project Control
• Time management
• Cost management
• Performance management• Earned Value Analysis – standard procedure to
• numerically measure a project’s progress
• forecast its completion date and cost
• measure schedule and budget variation
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Project Control
• Quality management• Communication
• Enterprise project management
9-18
CPM/PERT
• Critical Path Method (CPM)• DuPont & Remington-Rand• Deterministic task times• Activity-on-node network construction
• Project Evaluation and Review Technique (PERT)• US Navy and Booz, Allen & Hamilton• Probabilistic task time estimates • Activity-on-arrow network construction
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Project Network
Activity-on-node (AON) nodes represent activities arrows show precedence
relationships
Activity-on-arrow (AOA) arrows represent activities nodes are events for points
in time
Event completion or beginning of
an activity in a project
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1 32
Branch Node
AOA Project Network for a House
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3
2 0
1
3
1 1
11 2 4 6 7
3
5
Lay foundation
Design house and obtain financing
Order and receive materials
Dummy
Finish work
Select carpet
Select paint
Build house
Concurrent Activities
• Dummy• two or more activities cannot share same start and end
nodes
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2 3
Lay foundation
Order material
(a) Incorrect precedence relationship
(b) Correct precedence relationship
3
42
DummyLay foundation
Order material
1
2 0
AON Network for House Building Project
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13
22
43
31
51
61
71
Start
Design house and obtain financing
Order &receive materials
Select paint
Select carpet
Lay foundation
Build house
Finish work
Activity Number
Activity Time
Critical Path
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Critical path Longest path through a
network Minimum project
completion time
A: 1-2-4-73 + 2 + 3 + 1 = 9 months
B: 1-2-5-6-73 + 2 + 1 + 1 + 1 = 8 months
C: 1-3-4-73 + 1 + 3 + 1 = 8 months
D: 1-3-5-6-73 + 1 + 1 + 1 + 1 = 7 months
13
22
43
31
51
61
71
Start
Activity Start Times
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13
22
43
31
51
61
71
Start
Start at 3 months Start at 6 months
Start at 5 months
Finish at 9 months
Finish
Node Configuration
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1 0 3
3 0 3
Activityduration
Activitynumber
Earlieststart
Lateststart
Latest finish
Earliestfinish
Activity Scheduling
• Earliest start time (ES)• earliest time an activity can start • ES = maximum EF of immediate predecessors
• Forward pass• starts at beginning of CPM/PERT network to determine
earliest activity times
• Earliest finish time (EF)• earliest time an activity can finish• earliest start time plus activity time• EF= ES + t
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Earliest Activity Start and Finish Times
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1 0 3
1
2 3 5
2
3 3 4
1 5 5 6
1
4 5 8
3
6 6 7
1
7 8 9
1Start
Design house and obtain financing
Select paint
Lay foundation
Select carpet
Build house
Finish work
Order and receive materials
Activity Scheduling
• 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• LF = minimum LS of immediate predecessors
• Backward pass• Determines latest activity times by starting at the end of
CPM/PERT network and working forward
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Latest Activity Start and Finish Times
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0 3
1 0 3
1
3 5
2 3 5
2
4 5
3 3 4
1
6 7
5 5 6
1
5 8
4 5 8
3
6 7
6 6 7
1
8 9
7 8 9
1Start
Design house and obtain financing
Select paint
Lay foundation
Select carpet
Build house
Finish work
Order and receive materials
Activity Slack
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* Critical Path
09988*7
178676
167565
08855*4
145343
05533*2
03300*1
Slack SEFLFESLSActivity
Probabilistic Time Estimates
• Beta distribution• probability distribution traditionally used in CPM/PERT
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a = optimistic estimatem = most likely time estimateb = pessimistic time estimate
where
Mean (expected time): t =a + 4m + b
6
Variance: 2 =
2b - a
6
Examples of Beta Distributions
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P(t
ime)
P(t
ime)
P(t
ime)
Timea mt ba m t b
m = t
Time
Timeba
Project with Probabilistic Time Estimates
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Finish23,6,9
31,3,5
16,8,10
52,3,4
63,4,5
42,4,12
72,2,2
83,7,11
92,4,6
10
1,4,7
11
1,10,13
Equipment installation
System development
Position recruiting
Equipment testing and modification
Manual testing
Job Training
Orientation
System training
System testing
Final debugging
System changeover
Start
Activity Time Estimates
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1 6 8 10 8 0.44 2 3 6 9 6 1.00 3 1 3 5 3 0.44 4 2 4 12 5 2.78 5 2 3 4 3 0.11 6 3 4 5 4 0.11 7 2 2 2 2 0.00 8 3 7 11 7 1.78 9 2 4 6 4 0.4410 1 4 7 4 1.0011 1 10 13 9 4.00
TIME ESTIMATES (WKS) MEAN TIME VARIANCE
ACTIVITY a m b t б2
Activity Early, Late Times & Slack
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ACTIVITY t б ES EF LS LF S
1 8 0.44 0 8 1 9 1 2 6 1.00 0 6 0 6 0 3 3 0.44 0 3 2 5 2 4 5 2.78 8 13 16 21 8 5 3 0.11 6 9 6 9 0 6 4 0.11 3 7 5 9 2 7 2 0.00 3 5 14 16 11 8 7 1.78 9 16 9 16 0 9 4 0.44 9 13 12 16 310 4 1.00 13 17 21 25 811 9 4.00 16 25 16 25 0
Earliest, Latest, and Slack
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1 0 8
8 1 9
3 0 3
3 2 5
4 8 13
5 16 21
6 3 7
4 5 9
7 3 5
2 14 16
9 9 13
4 12 16
10 13 17
1 0 3
2 0 6
6 0 6 5 6 9
3 6 9
8 9 16
7 9 16
11 16 25
9 16 25
Critical Path 2-5-8-11
FinishStart
Total Project Variance
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2 = б22 + б5
2 + б82 + б11
2
= 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks
CPM/PERT With OM Tools
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Probabilistic Network Analysis
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Determine probability that project is completed within specified time
where = tp = project mean time = project standard deviation
x = proposed project timeZ = number of standard deviations that
x is from the mean
Z =x -
Normal Distribution of Project Time
9-41
= tp Timex
Z
Probability
Southern Textile
9-42
What is probability that project is completed within 30 weeks?
2 = 6.89 weeks
= 6.89
= 2.62 weeks
Z =
=
= 1.91
x -
30 - 252.62
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
= 25 Time (weeks)x = 30
P(x 30 weeks)
Southern Textile
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What is probability that project is completed within 22 weeks?
2 = 6.89 weeks
= 6.89
= 2.62 weeks
Z =
=
= -1.14
x -
22 - 252.62
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
= 25 Time (weeks)x = 22
P(x 22 weeks)= 0.1271
0.3729
Microsoft Project
• Popular software package for project management and CPM/PERT analysis
• Relatively easy to use
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Microsoft Project
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Click on “Tasks”
First step; Start Date
Microsoft Project
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Precedencerelationships
Click on “Format” then ”Timescale”to scale Gantt chart.
Gantt chart; click on “View”
to activateCreate precedencerelationships;
click on predecessoractivity, then
holding “Ctrl” Key,click on successor
activity.
Microsoft Project
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Click on “View” then Network Diagram
Critical pathin red
Microsoft Project – Zoom View
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Microsoft Project – Task Information
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Enter % completion
Microsoft Project – Degree of Completion
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Activities 1, 2 and 3100% complete
Black bars showdegree of completion
PERT Analysis with Microsoft Project
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Click on PERT EntrySheet to enter 3time estimates
Click on PERT calculator to compute
activity duration
PERT Analysis with Microsoft Project
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PERT Analysis with Microsoft Project
9-53
Project Crashing
• Crashing• reducing project time by expending additional resources
• Crash time• an amount of time an activity is reduced
• Crash cost• cost of reducing activity time
• Goal• reduce project duration at minimum cost
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Project Network – Building a House
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112
28
412
34
54
64
74
Normal Time and Costvs. Crash Time and Cost
Copyright 2011 John Wiley & Sons, Inc. 9-56
$7,000 –
$6,000 –
$5,000 –
$4,000 –
$3,000 –
$2,000 –
$1,000 –
–| | | | | | |
0 2 4 6 8 10 12 14 Weeks
Normal activity
Normal time
Normal cost
Crash time
Crashed activity
Crash cost
Slope = crash cost per week
Project Crashing
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TOTALNORMAL CRASH ALLOWABLE CRASH
TIME TIME NORMAL CRASH CRASH TIME COST PERACTIVITY (WEEKS) (WEEKS) COST COST (WEEKS) WEEK
1 12 7 $3,000 $5,000 5 $400
2 8 5 2,000 3,500 3 500
3 4 3 4,000 7,000 1 3,000
4 12 9 50,000 71,000 3 7,000
5 4 1 500 1,100 3 200
6 4 1 500 1,100 3 200
7 4 3 15,000 22,000 1 7,000
$75,000 $110,700
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Project Duration:36 weeks
112
28
34 5
4
64
74
$400
$500
$3000
$7000
$200$200
$700012
4 FROM …
17
28
34 5
4
64
74
$400
$500
$3000
$7000
$200$200
$700012
4
Project Duration:31 weeks
Additional Cost:$2000
TO…
Time-Cost Relationship
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• Crashing costs increase as project duration decreases
• Indirect costs increase as project duration increases
• Reduce project length as long as crashing costs are less than indirect costs
Time-Cost Tradeoff
9-60
Cos
t ($)
Project duration
Crashing Time
Minimum cost = optimal project timeTotal project cost
Indirect cost
Direct cost