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Project Management
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Introduction:Project Management Drivers
Expansion of knowledge
Demand for new products
Worldwide markets Competition
Belief better living though technology
Expanding size of projects
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Introduction:Three Project Objectives
Performance Cost
Time
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Introduction:Recent Managing Changes
Less hierarchical
Systems approach
Project oriented
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Project Definition
Definition used by PMI*:
*Project Management Institute
A temporary endeavor undertaken tocreate a unique product or service
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Terminology
Program (group of projects)
Project
Task (subset of work elements) Work package (sub element of task)
Work unit
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Project Attributes
Purpose
Life cycle Interdependencies
Uniqueness
Conflict
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Project Life Cycle:(% Completion) Vs. (Time)
Slow start
Quick momentum
Slow finish
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Project Life Cycle:Increasing Marginal Returns
Return as applied to late
stages in PLC
Compare to standard
PLC showing
DECREASING marginal
return in late stages of
PLC
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Project Life Cycle:Reduce Uncertainty of Cost Estimate
Figure 1.6
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Strategic Management
and Project Selection
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Overview of PS Process
Project Management Office (PMO):Aligning corporate needs and project goals
Project selection: Choose candidate
projects using evaluation criteria Dealing with uncertainty: Risk analysis
Strategically selecting best projects:Project Portfolio Process (PPP)
Locking up the deal: Writing a projectproposal
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Project Management Maturity
Levels
Ad-hoc (essentially disorganized)
Abbreviated (some processes exist) Organized (standardized processes)
Managed (measured processes)
Adaptive (continuous improvement)
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PS Models
Idealized view of reality
Representing the STRUCTURE of the
problem, not the detail
Deterministic or stochastic
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Criteria for Project Selection
Models
Realism (technical-, resource-, market-risk)
Capability (adequately sophisticated)
Flexibility (valid results over large domain) Ease of Use (no expert needed to run model)
Cost (much less than project benefit)
Easy Computerization (use standard software)
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Nature of PS models:
Caveats
Project decisions are made by PM ---
NOT by PS model!
A PS model APPROXIMATES, but
does NOT DUPLICATE reality!
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Nature of PS Models:Methodology
Startwith detailed list of firms goals
Create list of project evaluation factors(PEFs)
Weigh every element in PEF list
Compute an overall score for projectbased on weighted PEFs
Select project that has the closestalignment with firms goals
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Project Evaluation Factors
(PEFs)
Production Factors
Marketing Factors Financial Factors
Personnel Factors
Administrative and Misc. Factors
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Types of PS Models:Nonnumeric
Sacred Cow
Operating Necessity
Competitive Necessity
Product Line Extension
Comparative Benefit Model
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Numeric PS Models:
Profit / Profitability
Payback Period (PB)
Average Rate of Return
Discounted Cash Flow (NPV) Internal Rate of Return
Profitability Index
Other Profitability Models
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Choosing the PS Model
Dependent on wishes and philosophyof management
80% of Fortune 500 firms choosenonnumeric PS models
Firms with outside funding oftenchoose scoring PS models
Firms without outside funding oftenchoose profit / profitability PS models
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Elements of ProjectManagement
Project team
Individuals from different departments within
company Matrix organization
Team structure with members from different
functional areas depending on skills needed
Project manager Leader of project team
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Project Planning, Scheduling, and
ControllingProject Planning1. Setting goals
2. Defining the project
3. Tying needs into timed project
activities
4. Organizing the team
Project Scheduling1. Tying resources to specific activities
2. Relating activities to each other
3. Updating and revising on regular
basisProject Controlling1. Monitoring resources, costs, qualityand budgets
2. Revising and changing plans
3. Shifting resources to meet demands
Before Project
During Project
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Reasons for Project Planning
Establish directions for project team
Support objectives of parent organization
Make allowance for risk Put controls on the planned work
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Project Planning
Statement of work
Written description of goals, work & timeframe of project
Activities require labor, resources & time Precedence relationship shows sequential
relationship of project activities
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Project Planning
Statement of work
written description of goals, work & timeframe of project
Activities require labor, resources & timePrecedence relationship shows sequential
relationship of project activitiesConstruct forms Pour concrete1 32
Simp l i fied Pro ject Network
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Elements of
Project PlanningDefine project objective(s)
Identify activities
Establish precedence relationships
Make time estimates
Determine project completion time
Compare project schedule objectives
Determine resource requirements tomeet objective
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Work Breakdown Structure
Hierarchical organization of work to be
done on a project
Project broken down into modules
Modules subdivided into
subcomponents, activities, and tasks
Identifies individual tasks, workloads,
and resource requirements
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Work Breakdown Structure
Hierarchical organization of work to be
done on a project
Project broken down into modules
Modules subdivided into
subcomponents, activities, and tasks
Identifies individual tasks, workloads,
and resource requirements
Dinner
Pasta Sauce Salad Bread Wine Setting
Table Atmosphere
Purchase Purchase Purchase Purchase Purchase Set table Light candles
Boil water Add tomato Wash Butter top Open Turn on musicsauce/paste lettuce
Cook Saut Drain Slice Tasteonion & garlic lettuce
Drain Cool Tear Heat Servemeatballs lettuce
AddServe Add spices croutons/ Serve
dressing
Cook sauce Mix
Serve Serve Figure 6.1
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Budgeting and Cost Estimation
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Projects Make the Best of
Scarce Resources
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Developing a Project Budget
Three major elements
Forecast what will be needed
Labor and material
How much will it cost?
When will it be needed?
Thus, the budget reflects the project plan,
time-phased, in monetary terms
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Why Budgeting for Projects is
Tougher By definition, projects are unique, non-
recurring efforts
So theres often little history, little tradition
to rely on
Further, projects can last for years
More uncertainty, more risk
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Two Major Approaches to
Budgeting Top-Down
Bottom-Up
Each has advantages . . . And
disadvantages as well
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Behavioral Issues in Budgeting
Different perspectives, based on managerial
level
Senior people tend to underestimate, junior people
tend to overestimate Lower levels tend to arbitrarily add reserves, upper
levels to arbitrarily delete them
Bottom Line: Any system can be gamed
So know what the games are . . .
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Financial Issues Worth
Considering: Inflation Inflation can distort estimates in different ways
Actual costs from the past will be less than
comparables for today the older the data, the
greater the disparity
Long-duration projects can create special problems
Six percent inflation doubles cost in just 12 years . . .
. . . And 6% is low in much of the world
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A Gantt Chart
Popular too l for pro ject schedul ing
Graph w ith bar for represent ing the
t ime for each task Provides visual disp lay of project
schedule
A lso shows slack for act iv i ties
Amount of t ime act iv ity can bedelayed withou t delaying p roject
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A Gantt Chart
| | | | |Activity
Design houseand obtainfinancing
Lay foundation
Order andreceivematerials
Build house
Select paint
Select carpet
Finish work
0 2 4 6 8 10Month
Month1 3 5 7 9
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CPM/PERT
Critical Path Method (CPM)
DuPont & Remington-Rand (1956)
Deterministic task times
Activity-on-node network construction
Project Eval. & Review Technique (PERT)
US Navy, Booz, Allen & Hamilton
Multiple task time estimates Activity-on-arrow network
construction
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The Project Network
Network consists of branches & nodes
1 32
Branch
Node
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Project Network for a House
3
2 0
13
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
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Critical Path
A path is a sequence of connected activities
running from start to end node in network
The critical path is thepath with the longest
duration in the network
Project cannot be
completed in less thanthe time of the critical
path
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The Critical
Path
A: 1-2-3-4-6-7
3 + 2 + 0 + 3 + 1 = 9monthsB: 1-2-3-4-5-6-7
3 + 2 + 0 + 1 + 1 + 1 = 8months
C: 1-2-4-6-7
3 + 1 + 3 + 1 = 8monthsD: 1-2-4-5-6-7
3 + 1 + 1 + 1 + 1 = 7months
3
2 0
1
3
1 1
1
1 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
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The Critical
Path3
2 0
1
3
1 1
1
1 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
1 2 4 6 7
3
5
3
2 0
1
3
1 1Start at 3 months
Start at 5 months
1
Finish at
9 months
Start at 8 months
Activity Start Times
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Probabilistic Time Estimates
Reflect uncertainty of activity times
Beta distribution is used in PERT
a= optimistic estimate
m= most likely time estimate
b= pessimistic time estimate
where
Mean (expected time): t=a+ 4m+ b
6
Variance: 2 = b- a6
2
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Example Beta Distributions
P(time)
P(time)
P(time)
Time
a mt ba m t b
m = t
Time
Time
ba
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Normal Distribution Of Project Time
= tp Timex
Z
Probability
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Project Control
All activities identified and included
Completed in proper sequence
Resource needs identifiedSchedule adjusted
Maintain schedule and
budget
Complete on time
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Crashing costs increase as project
duration decreases
Indirect costs increase as projectduration increases
Reduce project length
as long as crashingcosts are less than
indirect costs
Time-Cost Relationship
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Time-Cost Tradeoff
Cost(
$)
Project duration
Crashing Time
Minimum cost = optimal project timeTotal project cost
Indirect cost
Direct cost
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