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Operations and Supply Chain Management, 8th Edition

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1 Operations and Supply Chain Management, 8th Edition
Chapter 9 Project Management Russell and Taylor Operations and Supply Chain Management, 8th Edition

2 Lecture Outline Project Planning – Slide 5
Project Scheduling – Slide 18 Project Control – Slide 21 CPM/PERT – Slide 22 Probabilistic Activity Times – Slide 34 Microsoft Project – Slide 46 Project Crashing and Time-Cost Trade-off – Slide 56 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

3 Learning Objectives Discuss the project planning process, including planning tools, evaluation methods, and key elements Discuss the benefits of and strategies for dealing with diverse project groups Explain the basics of project scheduling and the use of Gantt charts Define enterprise project management and discuss the key elements in project control © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

4 Learning Objectives Define enterprise project management and discuss the key elements in project control Develop and analyze both deterministic probabilistic and project networks Use Microsoft Project for network analysis Determine and explain project crashing and time-cost tradeoffs © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

5 Project Planning Project has unique purpose not repetitive
relatively short period of time one-time operational activity or effort draws resources from multiple departments © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

6 Project Management Process
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

7 Project Management Process
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

8 Project Management Process
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

9 Elements of a Project Plan
Objective Scope Contract requirements Schedules Resources Personnel Control Risk and problem analysis © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

10 (Gain from project – cost of project)
Project Return Project requires positive gain or benefit ROI is one measure, but not always applicable “Soft” returns Projects for public good ROI = (Gain from project – cost of project) Cost of project © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

11 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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

12 Scope Statement Scope statement Statement of work
a document that provides an understanding, justification, and expected result of a project Statement of work written description of objectives of a project © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

13 Work Breakdown Structure
Organizes the work in a project Breaks project into components, subcomponents, activities, and tasks Start at the top and work down Brainstorm project activities © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

14 Work Breakdown Structure for Computer Order Processing System Project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

15 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 the work in a project © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

16 Responsibility Assignment Matrix
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

17 Global Cultural 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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

18 Project Scheduling Steps Techniques Software Define activities
Sequence activities Estimate time Develop schedule Techniques Gantt chart CPM/PERT Software Microsoft Project © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

19 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 Shows precedence – sequence of tasks Slack amount of time an activity can be delayed without delaying the project © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

20 A Gantt Chart © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

21 Project Control Time management Cost management Quality management
Performance management Communication Enterprise project management © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

22 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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

23 Project Network Activity-on-node (AON) Activity-on-arrow (AOA) Event
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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

24 AOA Project Network for a House
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

25 Concurrent Activities
Dummy activity two or more activities cannot share same start and end nodes add dummy activity to show correct precedence © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

26 AON Network for House Building Project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

27 Activity Start Times Critical path Longest path through a network
A: = 9 months B: = 8 months C: = 8 months D: = 7 months Critical path Longest path through a network Minimum project completion time © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

28 Activity Scheduling Earliest start time (ES) Forward pass
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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

29 Node Configuration © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

30 Earliest Activity Start and Finish Times
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

31 Activity Scheduling Latest start time (LS) Latest finish time (LF)
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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

32 Latest Activity Start and Finish Times
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

33 Activity Slack Slack S EF LF ES LS Activity * Critical Path 9 8 *7 1 7
9 8 *7 1 7 6 5 *4 4 3 *2 *1 Slack S EF LF ES LS Activity © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

34 Probabilistic Activity Times
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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

35 Examples of the Beta Distribution
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

36 Project with Probabilistic Time Estimates
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

37 Activity Time Estimates
TIME ESTIMATES (WKS) MEAN TIME VARIANCE ACTIVITY a m b t б2 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

38 Activity Early, Late Times & Slack
ACTIVITY t б ES EF LS LF S © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

39 Earliest, Latest Times, and Slack
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

40 Total Project Variance
2 = б22 + б52 + б82 + б112 = = 6.89 weeks © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

41 CPM/PERT With OM Tools © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

42 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 -  © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

43 Normal Distribution of Project Time
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

44 Southern Textile – 30 weeks
 =  = 2.62 weeks x -  Z = = = 1.91 2.62 From Table A.1, (appendix A) a Z score of 1.91 corresponds to a probability of Thus P(30) = = © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

45 Southern Textile – 22 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) = = © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

46 Microsoft Project Popular software package for project management and CPM/PERT analysis Relatively easy to use House-building example © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

47 Microsoft Project Click on “Tasks” First step; Start Date
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

48 Microsoft Project © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

49 Microsoft Project © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

50 Microsoft Project – Zoom View
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

51 PERT Analysis with Microsoft Project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

52 PERT Analysis with Microsoft Project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

53 PERT Analysis with Microsoft Project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

54 Project Crashing Crashing Crash time Crash cost Goal
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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

55 Normal Time and Cost vs. Crash Time and Cost
$7,000 – $6,000 – $5,000 – $4,000 – $3,000 – $2,000 – $1,000 – – Crash cost Crashed activity Slope = crash cost per week Normal activity Normal cost Crash time Normal time | | | | | | | Weeks © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

56 Project Network – Building a House
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

57 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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

58 Weekly Crash Costs – Fig 9-16a
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

59 Project Crashed to 31 Weeks
Fig 9-16b © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

60 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 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

61 Minimum cost = optimal project time
Time-Cost Tradeoff Cost ($) Project duration Crashing Time Minimum cost = optimal project time Total project cost Indirect cost Direct cost © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

62 Copyright 2014 John Wiley & Sons, Inc. All rights reserved
Copyright 2014 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. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

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