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Chapter 9
Project Management
Copyright 2011 John Wiley & Sons, Inc.
Lecture Outline
• Project Planning• Project Scheduling• Project Control• CPM/PERT• Probabilistic Activity Times• Microsoft Project• Project Crashing and Time-Cost Trade-off
9-2
Copyright 2011 John Wiley & Sons, Inc.
Project Management Process
• Project• unique, one-time operational activity or effort
9-3
Project Management Process
Copyright 2011 John Wiley & Sons, Inc. 9-4
Copyright 2011 John Wiley & Sons, Inc.
Project Management Process
9-5
Copyright 2011 John Wiley & Sons, Inc.
Project Elements
• Objective• Scope• Contract requirements• Schedules• Resources• Personnel• Control• Risk and problem analysis
9-6
Copyright 2011 John Wiley & Sons, Inc.
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
Copyright 2011 John Wiley & Sons, Inc.
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
9-8
Copyright 2011 John Wiley & Sons, Inc.
Work Breakdown Structure
• Work breakdown structure (WBS)• Breaks a project into components,
subcomponents, activities, and tasks
9-9
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
Copyright 2011 John Wiley & Sons, Inc.
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
9-11
Copyright 2011 John Wiley & Sons, Inc. 9-12
Responsibility Assignment Matrix
Copyright 2011 John Wiley & Sons, Inc.
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
9-13
Copyright 2011 John Wiley & Sons, Inc.
Project Scheduling
• Steps• Define activities• Sequence activities• Estimate time• Develop schedule
• Techniques• Gantt chart• CPM/PERT
• Software• Microsoft Project
9-14
Copyright 2011 John Wiley & Sons, Inc.
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
9-15
Copyright 2011 John Wiley & Sons, Inc.
Example of Gantt Chart
9-16
| | | | |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
Copyright 2011 John Wiley & Sons, Inc.
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
9-17
Copyright 2011 John Wiley & Sons, Inc.
Project Control
• Quality management• Communication• Enterprise project management
9-18
Copyright 2011 John Wiley & Sons, Inc.
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
9-19
Copyright 2011 John Wiley & Sons, Inc.
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
9-20
1 32
Branch Node
Copyright 2011 John Wiley & Sons, Inc.
AOA Project Network for a House
9-21
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
Copyright 2011 John Wiley & Sons, Inc.
Concurrent Activities
• Dummy• two or more activities cannot share same start and
end nodes
9-22
2 3
Lay foundation
Order material
(a) Incorrect precedence relationship
(b) Correct precedence relationship
3
42
DummyLay foundation
Order material
1
2 0
Copyright 2011 John Wiley & Sons, Inc.
AON Network for House Building Project
9-23
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
Copyright 2011 John Wiley & Sons, Inc. 9-24
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
Copyright 2011 John Wiley & Sons, Inc.
Activity Start Times
9-25
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
Copyright 2011 John Wiley & Sons, Inc.
Node Configuration
9-26
1 0 3
3 0 3
Activityduration
Activitynumber
Earlieststart
Lateststart
Latest finish
Earliestfinish
Copyright 2011 John Wiley & Sons, Inc.
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
9-27
Copyright 2011 John Wiley & Sons, Inc.
Earliest Activity Start and Finish Times
9-28
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
Copyright 2011 John Wiley & Sons, Inc.
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
9-29
Copyright 2011 John Wiley & Sons, Inc.
Latest Activity Start and Finish Times
9-30
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
Copyright 2011 John Wiley & Sons, Inc. 9-31
* Critical Path
09988*7
178676
167565
08855*4
145343
05533*2
03300*1
Slack SEFLFESLSActivity
Copyright 2011 John Wiley & Sons, Inc.
Probabilistic Time Estimates
• Beta distribution• probability distribution traditionally used in CPM/PERT
9-32
a = optimistic estimatem = most likely time estimateb = pessimistic time estimate
where
Mean (expected time): t =a + 4m + b
6
Variance: 2 =
2b - a
6
Copyright 2011 John Wiley & Sons, Inc.
Examples of Beta Distributions
9-33
P(t
ime)
P(t
ime)
P(t
ime)
Timea mt ba m t b
m = t
Time
Timeba
Copyright 2011 John Wiley & Sons, Inc.
Project with Probabilistic Time Estimates
9-34
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
Copyright 2011 John Wiley & Sons, Inc.
Activity Time Estimates
9-35
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
Copyright 2011 John Wiley & Sons, Inc.
Activity Early, Late Times & Slack
9-36
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
Copyright 2011 John Wiley & Sons, Inc.
Earliest, Latest, and Slack
9-37
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
Copyright 2011 John Wiley & Sons, Inc.
Total Project Variance
9-38
s 2 = б22 + б5
2 + б82 + б11
2
s = 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks
Copyright 2011 John Wiley & Sons, Inc.
CPM/PERT With OM Tools
9-39
Copyright 2011 John Wiley & Sons, Inc.
Probabilistic Network Analysis
9-40
Determine probability that project is completed within specified time
where = tp = project mean time = project standard deviationx = proposed project timeZ = number of standard deviations that
x is from the mean
Z =x -
Copyright 2011 John Wiley & Sons, Inc.
Normal Distribution of Project Time
9-41
= tp Timex
Z
Probability
Copyright 2011 John Wiley & Sons, Inc.
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)
Copyright 2011 John Wiley & Sons, Inc.
Southern Textile
9-43
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
Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project
• Popular software package for project management and CPM/PERT analysis
• Relatively easy to use
9-44
Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project
9-45
Click on “Tasks”
First step; Start Date
Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project
9-46
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.
Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project
9-47
Click on “View” then Network Diagram
Critical pathin red
Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project – Zoom View
9-48
Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project – Task Information
9-49
Enter % completion
Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project – Degree of Completion
9-50
Activities 1, 2 and 3100% complete
Black bars showdegree of completion
Copyright 2011 John Wiley & Sons, Inc.
PERT Analysis with Microsoft Project
9-51
Click on PERT EntrySheet to enter 3time estimates
Click on PERT calculator to compute
activity duration
Copyright 2011 John Wiley & Sons, Inc.
PERT Analysis with Microsoft Project
9-52
Copyright 2011 John Wiley & Sons, Inc.
PERT Analysis with Microsoft Project
9-53
Copyright 2011 John Wiley & Sons, Inc.
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
9-54
Project Network – Building a House
Copyright 2011 John Wiley & Sons, Inc. 9-55
112
28
412
34
54
64
74
Copyright 2011 John Wiley & Sons, Inc.
Normal Time and Costvs. Crash Time and Cost
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
Copyright 2011 John Wiley & Sons, Inc.
Project Crashing
9-57
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
Copyright 2011 John Wiley & Sons, Inc. 9-58
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:$2000
TO…
Copyright 2011 John Wiley & Sons, Inc.
Time-Cost Relationship
9-59
• Crashing costs increase as project duration decreases
• Indirect costs increase as project duration increases
• Reduce project length as long as crashing costs are less than indirect costs
Copyright 2011 John Wiley & Sons, Inc.
Time-Cost Tradeoff
9-60
Cos
t ($)
Project duration
Crashing Time
Minimum cost = optimal project timeTotal project cost
Indirect cost
Direct cost
Copyright 2011 John Wiley & Sons, Inc. 6-61
Copyright 2011 John Wiley & Sons, Inc.All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.