EUT443 – Engineering Management

Chapter 1

The World of Project Management

EUT443 – Engineering Management

WHAT IS A PROJECT?

EUT443 – Engineering Management

Why the emphasis on project management?• Many tasks do not fit neatly into business-

as-usual.

• Need to assign responsibility and authority for achievement of organizational goals.

EUT443 – Engineering Management

Characteristics of Projects

• Unique

• Specific Deliverable

• Specific Due Date

EUT443 – Engineering Management

Other Common Characteristics of Projects• Multidisciplinary

• Complex

• Conflict

• Part of Programs

EUT443 – Engineering Management

PMI Definition

“A temporary endeavor undertaken to create a unique product or service”

Project Management Institute, 2000

EUT443 – Engineering Management

PROJECT MANAGEMENT VS. GENERAL MANAGEMENT

EUT443 – Engineering Management

Skill Requirements for Effective Project Management• Conflict Resolution

• Creativity and Flexibility

• Ability to Adjust to Change

• Good Planning

• Negotiation– win-win versus win-lose

EUT443 – Engineering Management

WHAT IS MANAGED? THE THREE GOALS OF A

PROJECT

EUT443 – Engineering Management

Figure 1-1: Performance, Cost, and Time Project Targets

EUT443 – Engineering Management

THE LIFE CYCLES OF PROJECTS

EUT443 – Engineering Management

Figure 1-2 The Project Life Cycle

EUT443 – Engineering Management

Figure 1-3 An Alternate Project Life Cycle

EUT443 – Engineering Management

SELECTING PROJECTS

EUT443 – Engineering Management

Nonnumeric Selection Methods• The Sacred Cow

• The Operating/Competitive Necessity

• Comparative Benefits

EUT443 – Engineering Management

Figure 1-4 The Q-Sort Method

EUT443 – Engineering Management

Numeric Selection Methods

• Financial Assessment Methods– payback period– discounted cash flow

• Scoring Methods– unweighted 0-1 factor method– weighted factor scoring method

EUT443 – Engineering Management

Payback Period

InflowsCash Net Annual

Investment Fixed Initial

EUT443 – Engineering Management

Discounted Cash Flow

n

tt

t

k

F

10 )1(

I- (project) NPV

where

I0 = the initial investment

Ft = the net cash flow in period t

k = the required rate of return or hurdle rate

EUT443 – Engineering Management

The Weighted Scoring Model

n

jjiji wsS

1

where

Si = the total score of the ith project

sij = the score of the ith project on the jth criterion

wj = the weight or importance of the jth criterion

EUT443 – Engineering Management

Confronting Uncertainty – The Management of Risk

EUT443 – Engineering Management

What uncertainties are encountered in project management?• Time required to complete a project

• Availability of key resources

• Cost of resources

• Timing of solutions to technological problems

• Actions taken by competitors

EUT443 – Engineering Management

Can uncertainty surrounding projects ever be eliminated?• No, but it can be managed

EUT443 – Engineering Management

Risk Analysis

• Estimate probabilities or distributions associated with key parameters

• Develop analytic or simulation model

• Analyze distribution of outcomes generated by model

EUT443 – Engineering Management

Risk Analysis with Crystal Ball• Assumption Cells

• Distribution Gallery

• Forecast Cells

EUT443 – Engineering Management

THE PROJECT PORTFOLIO PROCESS

EUT443 – Engineering Management

The Project Portfolio Process

• Step 1: Establish a Project Council• Step 2: Identify Project Categories and Criteria• Step 3: Collect Project Data• Step 4: Assess Resource Availability• Step 5: Reduce the Project and Criteria Set• Step 6: Prioritize the Projects within Categories• Step 7: Select the Projects to be Funded and

Held in Reserve• Step 8: Implement the Process

EUT443 – Engineering Management

The Aggregate Project Plan

EUT443 – Engineering Management

Figure 1-12 An Example Aggregate Project Plan

EUT443 – Engineering Management

Copyright

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