17-1

Project Management

Operations Management

William J. Stevenson

8th edition

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Project Management

CHAPTER

17

Project Management

McGraw-Hill/Irwin

Operations Management, Eighth Edition, by William J. Stevenson Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

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Project Management

Projects
JAN FEB MAR APR MAY JUN

Build A A Done Build B B Done Build C C Done Build D Ship

On time!

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

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Project Management

Project 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 Management

Project 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 Management

Project Management

What are the Major Administrative Issues?

Executive responsibilities

Project selection Project manager selection Organizational structure Manage within functional unit Assign a coordinator Use a matrix organization with a project leader

Organizational alternatives

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Project Management

What are the tools?

Work breakdown structure Network diagram Gantt charts Risk management

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Project Management

Planning and Scheduling

MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Gantt Chart
Locate new facilities Interview staff Hire and train staff Select and order furniture

Remodel and install phones

Move in/startup

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Project Management

Key Decisions

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

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Project Manager

Responsible for:

Work Human Resources Communications

Quality Time Costs

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Ethical Issues

Temptation to understate costs

Withhold information
Misleading status reports Falsifying records Comprising workers safety Approving substandard work

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Project Life Cycle

Feasibility

Management

Concept

Planning Execution Termination

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Work Breakdown Structure

Project X

Figure 17.2

Level 1 Level 2

Level 3 Level 4

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PERT and CPM

Program Evaluation and Review Technique Critical Path Method

PERT:

CPM:

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 Diagram

Network (precedence) diagram

Activity-on-arrow (AOA) Activity-on-node (AON) Activities Events

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The Network Diagram (contd)

Path

Sequence of activities that leads from the starting node to the finishing node The longest path; determines expected project duration Activities on the critical path Allowable slippage for path; the difference the length of path and the length of critical path

Critical path

Critical activities

Slack

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Project Network Activity on Arrow

Order furniture

Figure 17.4

AOA
Locate facilities

4
Furniture setup

2
Remodel

1
Interview

5
Move in Hire and train

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Project Network Activity on Node

Order furniture Locate facilities

Figure 17.4
Furniture setup

AON

1
Remodel

6
Move in

S
Hire and train

Interview

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Network Conventions
b c

a c b a

a a c b b d

c Dummy activity

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Time Estimates

Deterministic

Time estimates that are fairly certain

Probabilistic

Estimates of times that allow for variation

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Example 1
6 weeks

Figure 17.5
Deterministic time estimates
8 weeks

4
2
11 weeks 3 weeks

1
4 weeks 9 weeks

Move in 1 week

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Example 1 Solution

Critical Path

Path 1-2-3-4-5-6 1-2-5-6 1-3-5-6

Length
(weeks)

Slack 2 0 6

18 20 14

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Computing Algorithm

Network activities

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

Used to determine

Expected project duration Slack time Critical path

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Probabilistic 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 Estimates

Figure 17.8

to Activity start Optimistic time

tm

te

tp Pessimistic time

Most likely time (mode)

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Expected Time

te

t + 4t +t o m p = 6
te = expected time to = optimistic time tm = most likely time tp = pessimistic time

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Variance

2 (t t ) = p o 36

2 = variance to = optimistic time tp = pessimistic time

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Example 5
Most likely time Pessimistic time

Optimistic time

2-4-6 b 3-4-5 d 3-5-7 e 4-6-8 h 5-7-9 f

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Path Probabilities
Specified time Path mean Path standard deviation

Z =

Z indicates how many standard deviations of the path distribution the specified tine is beyond the expected path duration.

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Example 6
17 Weeks 1.00

a-b-c 10.0 Weeks

d-e-f 16.0 Weeks

1.00
g-h-i 13.5 Weeks

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Time-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: Crashing

Total cost Expected indirect costs

Figure 17.11

Shorten

Cumulative cost of crashing Optimum

CRASH

Shorten

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Example 7

2 f 4 d

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Advantages of PERT

Forces managers to organize Provides graphic display of activities Identifies

Critical activities
2

Slack activities
1 5 6

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Limitations of PERT

Important activities may be omitted Precedence relationships may not be correct Estimates may include a fudge factor
4 2

May focus solely on critical path

142 weeks 3

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Technology for Managing Projects

Computer aided design (CAD) Groupware (Lotus Notes) Project management software

CA Super Project Harvard Total Manager MS Project Sure Track Project Manager Time Line

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Advantages of PM Software

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

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Project Risk Management

Risk: occurrence of events that have undesirable consequences

Delays Increased costs Inability to meet specifications Project termination

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Risk Management

Identify potential risks

Analyze and assess risks Work to minimize occurrence of risk Establish contingency plans

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Summary

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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CHAPTER

17

Additional PowerPoint slides contributed by Geoff Willis, University of Central Oklahoma.

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Project Crashing

Crashing a project involves paying more money to complete a project more quickly. Since the critical path determines the length of a project, it makes sense to reduce the length of activities on the critical path. CP activities should be reduced until the project is reduced to the desired length or you are paying more per day than you save. If you have multiple CPs, they should be shortened simultaneously.

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Projects Concepts

PM1 Definition/Example Alton Bridge