1. Chapter 9
Project Management

2. 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
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3. Project Management Process
unique, one-time operational activity or effort
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4. Project Management Process
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5. Project Management Process
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6. Copyright 2011 John Wiley & Sons, Inc.
Project Elements
Objective
Scope
Contract requirements
Schedules
Resources
Personnel
Control
Risk and problem analysis
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7. Project Team and Project Manager
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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8. 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
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9. Work Breakdown Structure
Work breakdown structure (WBS)
Breaks a project into components, subcomponents, activities, and tasks
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10. Work Breakdown Structure for Computer Order Processing System Project
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11. 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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12. Responsibility Assignment Matrix
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13. 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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14. 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
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15. 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
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16. Copyright 2011 John Wiley & Sons, Inc.
Example of Gantt Chart
| | | | |
Activity
Design house and obtain financing
Lay foundation
Order and receive materials
Build house
Select paint
Select carpet
Finish work
Month
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17. 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
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18. Copyright 2011 John Wiley & Sons, Inc.
Project Control
Quality management
Communication
Enterprise project management
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19. 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
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20. 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
Branch
Node 1 2 3
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21. AOA Project Network for a House3 2 1 4 6 7 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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22. Concurrent Activities
Dummy
two or more activities cannot share same start and end nodes 2 3
Lay foundation
Order material
(a) Incorrect precedence relationship
(b) Correct precedence relationship 4
Dummy
Lay
foundation 1
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23. AON Network for House Building Project1 3 2 4 5 6 7
Start
Design house and obtain financing
Order &receive materials
Select paint
Select carpet
Lay foundation
Build house
Finish work
Activity Number
Activity Time
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24. Copyright 2011 John Wiley & Sons, Inc.
Critical Path 1 3 2 4 5 6 7
Start
A: = 9 months
B: = 8 months
C: = 8 months
D: = 7 months
Critical path
Longest path through a network
Minimum project completion time
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25. Copyright 2011 John Wiley & Sons, Inc.
Activity Start Times 1 3 2 4 5 6 7
Start
Start at 3 months
Start at 6 months
Start at 5 months
Finish at 9 months
Finish
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26. Copyright 2011 John Wiley & Sons, Inc.
Node Configuration 1 3
Activity duration
Activity number
Earliest start
Latest start
Latest finish
Earliest finish
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27. 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
Copyright 2011 John Wiley & Sons, Inc.

28. Earliest Activity Start and Finish Times
Lay foundation
Build house 2 3 5 4 5 8 2 3
Finish work 1 3 7 8 9
Start 1 1
Design house and obtain financing 6 6 7 3 3 4 1 1 5 5 6
Select carpet 1
Order and receive materials
Select paint
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29. 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
Copyright 2011 John Wiley & Sons, Inc.

30. 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 3 7 8 9
Start 1 3 1 8 9
Design house and obtain financing 6 6 7 3 3 4 1 6 7 1 4 5 5 5 6
Select carpet 1 6 7
Order and receive materials
Select paint
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31. Copyright 2011 John Wiley & Sons, Inc.
Activity Slack
* Critical Path 9 8 *7 1 7 6 5 *4 4 3 *2 *1
Slack S EF LF ES LS
Activity
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32. Probabilistic Time Estimates
Beta distribution
probability distribution traditionally used in CPM/PERT
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate
where
Mean (expected time): t =
a + 4m + b 6
Variance: 2 = 2
b - a
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33. Examples of Beta Distributions
P(time)
Time a m t b
m = t
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34. Project with Probabilistic Time Estimates
Finish 2
3,6,9 3
1,3,5 1
6,8,10 5
2,3,4 6
3,4,5 4
2,4,12 7
2,2,2 8
3,7,11 9
2,4,6 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
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35. Activity Time Estimates
TIME ESTIMATES (WKS) MEAN TIME VARIANCE
ACTIVITY a m b t б2
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36. Activity Early, Late Times & Slack
ACTIVITY t б ES EF LS LF S
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37. Earliest, Latest, and Slack1 8 9 3 2 5 4 13 16 21 6 7 14 12 10 17 11 25
Critical Path
Finish
Start
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38. Total Project Variance
2 = б22 + б52 + б82 + б112 =
= 6.89 weeks
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39. Copyright 2011 John Wiley & Sons, Inc.
CPM/PERT With OM Tools
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40. Probabilistic Network Analysis
Determine probability that project is completed within specified time
where
 = tp = project mean time
 = project standard deviation
x = proposed project time
Z = number of standard deviations that x is from the mean
Z =
x -  
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41. Normal Distribution of Project Time
 = tp
Time x Z
Probability
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42. Copyright 2011 John Wiley & Sons, Inc.
Southern Textile
What is probability that project is completed within 30 weeks?
 2 = 6.89 weeks
 =
 = 2.62 weeks
Z = =
= 1.91
x -  
2.62
From Table A.1, (appendix A) a Z score of 1.91 corresponds to a probability of Thus P(30) = =
 = 25
Time (weeks)
x = 30
P(x  30 weeks)
Copyright 2011 John Wiley & Sons, Inc.

43. Copyright 2011 John Wiley & Sons, Inc.
Southern Textile
What is probability that project is completed within 22 weeks?
 2 = 6.89 weeks
 =
 = 2.62 weeks
Z = =
= -1.14
x -  
2.62
From Table A.1, (appendix A) a Z score of 1.14 corresponds to a probability of Thus P(22) = =
 = 25
Time (weeks)
x = 22
P(x  22 weeks) =
0.3729
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44. Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project
Popular software package for project management and CPM/PERT analysis
Relatively easy to use
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45. Copyright 2011 John Wiley & Sons, Inc.
Microsoft Project
Click on “Tasks”
First step; Start Date
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46. Microsoft Project
Precedence relationships
Click on “Format” then ”Timescale” to scale Gantt chart.
Gantt chart; click on “View” to activate
Create precedence relationships; click on predecessor activity, then holding “Ctrl” Key, click on successor activity.
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47. Microsoft Project Click on “View” then Network Diagram
Critical path in red
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48. Microsoft Project – Zoom View
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49. Microsoft Project – Task Information
Enter % completion
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50. Microsoft Project – Degree of Completion
Activities 1, 2 and 3 100% complete
Black bars show degree of completion
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51. 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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52. PERT Analysis with Microsoft Project
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53. PERT Analysis with Microsoft Project
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54. 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
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55. Project Network – Building a House1 12 2 8 4 3 5 6 7
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56. Normal Time and Cost vs. Crash Time and Cost
$7,000 –
$6,000 –
$5,000 –
$4,000 –
$3,000 –
$2,000 –
$1,000 – –
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Weeks
Normal activity
Normal time
Normal cost
Crash time
Crashed activity
Crash cost
Slope = crash cost per week
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57. Copyright 2011 John Wiley & Sons, Inc.
Project Crashing
TOTAL
NORMAL CRASH ALLOWABLE CRASH
TIME TIME NORMAL CRASH CRASH TIME COST PER
ACTIVITY (WEEKS) (WEEKS) COST COST (WEEKS) WEEK
$3,000 $5,000 5 $400
,000 3,
,000 7, ,000
,000 71, ,000 , ,
,000 22, ,000
$75,000 $110,700
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58. Copyright 2011 John Wiley & Sons, Inc.12 2 8 3 4 5 6 7
$400
$500
$3000
$7000
$200
FROM …
Project Duration:
36 weeks 1 7 2 8 3 4 5 6
$400
$500
$3000
$7000
$200 12
TO…
Project Duration:
31 weeks
Additional Cost:
$2000
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59. 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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60. Time-Cost Tradeoff Minimum cost = optimal project time
Project duration
Crashing Time
Minimum cost = optimal project time
Total project cost
Indirect cost
Direct cost
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61. Copyright 2011 John Wiley & Sons, Inc.
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