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

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 Project Management Process
• Project
• unique, one-time operational activity or effort

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 Project Management Process

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 Project Management Process

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 Project Elements
• Objective
• Scope
• Contract requirements
• Schedules
• Resources
• Personnel
• Control
• Risk and problem analysis

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 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

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 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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 Work
Work Breakdown
Breakdown Structure
Structure for
for Computer
Computer Order
Order
Processing
Processing System
System Project
Project

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 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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 Responsibility Assignment Matrix

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 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 • Techniques
• Define activities • Gantt chart
• Sequence activities • CPM/PERT
• Estimate time • Software
• Develop schedule • 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

Copyright 2011 John Wiley & Sons, Inc. 9-15

 Example of Gantt Chart
Month
0 | 2 | 4 | 6 | 8 | 10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials

Build house

Select paint

Select carpet

Finish work

1 3 5 7 9
Month
Copyright 2011 John Wiley & Sons, Inc. 9-16
 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

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 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 Branch Node
• arrows show precedence
1 2 3
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

Copyright 2011 John Wiley & Sons, Inc. 9-20

 AOA Project Network for a House

3
Lay Dummy
foundation
2 0 Build Finish
3 1 house work
1 2 4 6 7
Design house Order and 3 1
and obtain receive 1 1
Select Select
financing materials paint carpet
5

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 Concurrent Activities
• Dummy
• two or more activities cannot share same start and
end nodes

3
Lay foundation Lay
Dummy
foundation
2 0
2 3
1
Order material 2 4
Order material
(a) Incorrect precedence (b) Correct precedence
relationship relationship

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 AON Network for House Building
Project
Lay Build
foundation house
Activity Number
2 4
Activity Time
2 3

Start 1 7
3 1
Finish work
Design house 3 5 6
and obtain
1 1 1
financing
Order &receive Select Select
materials paint carpet

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 Critical Path
2 4
2 3

Start 1 7
3 1
3 5 6
1 1 1

A: 1-2-4-7
3 + 2 + 3 + 1 = 9 months  Critical path
B: 1-2-5-6-7  Longest path through a
3 + 2 + 1 + 1 + 1 = 8 months network
C: 1-3-4-7
3 + 1 + 3 + 1 = 8 months
 Minimum project
D: 1-3-5-6-7 completion time
3 + 1 + 1 + 1 + 1 = 7 months

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 Activity Start Times

Start at 5 months
2 4
2 3 Finish at 9 months

Start 1 7
Finish
3 1
3 5 6
1 1 1
Start at 3 months Start at 6 months

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 Node Configuration

Activity Earliest Earliest

number start finish

1 0 3

3 0 3

Activity Latest Latest

duration start finish

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 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
Lay foundation
Build house
2 3 5
4 5 8
2
3 Finish work

1 0 3 7 8 9
Start
1 1
Design house
and obtain 6 6 7
financing 3 3 4
1
1 5 5 6
Select carpet
Order and 1
receive materials
Select paint

Copyright 2011 John Wiley & Sons, Inc. 9-28

 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

Copyright 2011 John Wiley & Sons, Inc. 9-29

Latest Activity Start and Finish Times
Lay foundation
Build house
2 3 5
4 5 8
2 3 5
3 5 8 Finish work

1 0 3 7 8 9
Start
1 0 3 1 8 9
Design house
and obtain 6 6 7
financing 3 3 4
1 6 7
1 4 5 5 5 6
Select carpet
Order and 1 6 7
receive materials
Select paint

Copyright 2011 John Wiley & Sons, Inc. 9-30

 Activity Slack
Activity LS ES LF EF Slack S
*1 0 0 3 3 0
*2 3 3 5 5 0
3 4 3 5 4 1
*4 5 5 8 8 0
5 6 5 7 6 1
6 7 6 8 7 1
*7 8 8 9 9 0
* Critical Path

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 Probabilistic Time Estimates
• Beta distribution
• probability distribution traditionally used in CPM/PERT

a + 4m + b
Mean (expected time): t =
6
2
b-a
Variance:  =
2
6
where
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate

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 Examples of Beta Distributions
P(time)

P(time)
a m t b a t m b
Time Time
P(time)

a m=t b
Time

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 Project with Probabilistic Time Estimates

Equipment Equipment testing

installation and modification

1 4 System Final
6,8,10 2,4,12 training debugging
System 10
development 8
Manual 3,7,11 1,4,7
Start 2 testing Finish
3,6,9
5 11
Position 2,3,4 9 1,10,13
recruiting 2,4,6
Job Training System
3 6 System changeover
1,3,5 3,4,5 testing

Orientation
7
2,2,2

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 Activity Time Estimates

TIME ESTIMATES (WKS) MEAN TIME VARIANCE

ACTIVITY a m b t б2
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 0.44
10 1 4 7 4 1.00
11 1 10 13 9 4.00

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 Activity Early, Late Times & Slack
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 3
10 4 1.00 13 17 21 25 8
11 9 4.00 16 25 16 25 0

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 Earliest, Latest, and Slack
Critical Path 2-5-8-11
1 0 8 4 8 13
8 1 9 5 16 21
10 13 17

16
1 0 3
8 9
2 0 6 Finish
Start 7 9 16
6 0 6 9
5 6 11 16 25
3 6 9 9 9 13
9 16 25
4 12 16
3 0 3 6 3 7
3 2 5 4 5 9

7 3 5
2 14 16

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 Total Project Variance

s2 = б22 + б52 + б82 + б112

s = 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks

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 CPM/PERT With OM Tools

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 Probabilistic Network Analysis

Determine probability that project is

completed within specified time
x-
Z= 
where
= tp = project mean time
= project standard deviation
x= proposed project time
Z= number of standard deviations that
x is from the mean

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 Normal Distribution of Project Time

Probability

Z

 = tp x Time

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 Southern Textile

What is probability that project is completed within 30 weeks?

P(x  30 weeks)
x-
 2 = 6.89 weeks Z= 
 = 6.89 30 - 25
= 2.62
 = 2.62 weeks
= 1.91
 = 25 x = 30 Time (weeks)

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

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 Southern Textile
What is probability that project is completed within 22 weeks?
P(x  22 weeks) 0.3729
= 0.1271 x-
 2 = 6.89 weeks Z= 
 = 6.89 22 - 25
= 2.62
 = 2.62 weeks
= -1.14
x = 22  = 25 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

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 Microsoft Project
• Popular software package for project
management and CPM/PERT analysis
• Relatively easy to use

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 Microsoft Project

Click on “Tasks”

First step;
Start Date

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 Microsoft Project

Click on “Format” then ”Timescale”

to scale Gantt chart.

Gantt chart;
Precedence click on “View”
Create precedence relationships to activate
relationships;
click on predecessor
activity, then
holding “Ctrl” Key,
click on successor
activity.

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 Microsoft Project
Click on “View” then
Network Diagram

Critical path
in red

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 Microsoft Project – Zoom View

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 Microsoft Project – Task Information

Enter % completion

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Microsoft Project – Degree of Completion

Activities 1, 2 and 3 Black bars show

100% complete degree of completion

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PERT Analysis with Microsoft Project
Click on PERT Entry
Sheet to enter 3
time estimates

Click on PERT
calculator to compute
activity duration

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 PERT Analysis with Microsoft Project

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 PERT Analysis with Microsoft Project

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 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

2 4
12
8
7
1 4
12
6
3 5 4
4 4

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 Normal Time and Cost
vs. Crash Time and Cost
$7,000 –

$6,000 –
Crash cost

$5,000 – Crashed activity

Slope = crash cost per week

$4,000 –

$3,000 – Normal activity

Normal cost
$2,000 –

$1,000 –
Crash time Normal time
| | | | | | |
–
0 2 4 6 8 10 12 14 Weeks
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 Project Crashing
TOTAL
NORMAL CRASH ALLOWABLE CRASH
TIME TIME NORMAL CRASH CRASH TIME COST PER
ACTIVITY (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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 $500 $7000
4
2
$7000
FROM …
8 12
7 Project Duration:
1 4
12
36 weeks

$400 3 6
4 5 4
4 $200
$3000
$200

$500 $7000
2 4
$7000
TO… 8 12
7
Project Duration: 1 4
31 weeks 7
Additional Cost:
$400 3 6
$2000 5 4
4
4 $200
$3000
$200
Copyright 2011 John Wiley & Sons, Inc. 9-58
 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 Time
Project duration

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