Stevenson 17 Project Management

Learning Objectives Discuss the behavioral aspects of projects in terms of project personnel and the project manager. Discuss the nature and importance of a work breakdown structure in project management. Give a general description of PERT/CPM techniques. Construct simple network diagrams.

Learning Objectives List the kinds of information that a PERT or CPM analysis can provide. Activity Scheduling Analyze networks with deterministic times. Analyze networks with probabilistic times. Describe activity “crashing.

Projects Build A A Done Build B B Done Build C C Done Build D Ship JAN FEB MAR APR MAY JUN On time! Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame.

Project Management How is it different? Why is it used? Limited time frame Narrow focus, specific objectives Less bureaucratic Why is it used? Special needs Pressures for new or improves products or services

Project Management What are the Key Metrics Time Cost Performance objectives What are the Key Success Factors? Top-down commitment Having a capable project manager Having time to plan Careful tracking and control Good communications

Project Management What are the Major Administrative Issues? Executive responsibilities Project selection Project manager selection Organizational structure Organizational alternatives Manage within functional unit Assign a coordinator Use a matrix organization with a project leader

Key Decisions Deciding which projects to implement Selecting a project manager Selecting a project team Planning and designing the project Managing and controlling project resources Deciding if and when a project should be terminated

Project Manager Responsible for: Work Quality Human Resources Time Communications Costs

Project Life Cycle

Project Management What are the tools? Gantt charts Work breakdown structure Network diagram Risk management

Gantt Chart A popular tool for planning and scheduling simple projects, and for initial planning for more complex projects Graph or bar chart Bars represent the time for each task Bars also indicate status of tasks Provides visual display of project schedule Closely associated with PERT Slack amount of time an activity can be delayed without delaying the project

Planning and Scheduling MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Locate new facilities Interview staff Hire and train staff Select and order furniture Remodel and install phones Move in/startup Gantt Chart

Precedence Relationship Activity Activity Legend Activity Predecessor Activity Duration Design house and obtain financing 1 - 3 Lay foundation 2 Order and receive material Build house 4 2,3 Select Paint 5 Select Carpet 6 Finish work 7 4,6

Example of Gantt Chart Month 0 2 4 6 8 10 | | | | | 1 3 5 7 9 Activity | | | | | 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 10 Month 1 3 5 7 9

Work Breakdown Structure Project X Level 1 Level 2 Level 3 Level 4

Work Breakdown Structure

PERT and CPM PERT: Program Evaluation and Review Technique CPM: Critical Path Method Graphically displays project activities Estimates how long the project will take Indicates most critical activities Show where delays will not affect project

The Network Diagram Network (precedence) diagram – diagram of project activities that shows sequential relationships by the use of arrows and nodes. Activity-on-arrow (AOA) – a network diagram convention in which arrows designate activities. Activity-on-node (AON) – a network diagram convention in which nodes designate activities. Activities – steps in the project that consume resources and/or time. Events – the starting and finishing of activities, designated by nodes in the AOA convention.

The Network Diagram (cont’d) Path Sequence of activities that leads from the starting node to the finishing node Critical path The longest path; determines expected project duration Critical activities Activities on the critical path Slack Allowable slippage for path; the difference the length of path and the length of critical path

Project Network – Activity on Arrow 1 2 3 4 5 6 Locate facilities Order furniture Furniture setup Interview Hire and train Remodel Move in AOA

Project Network – Activity on Node 1 2 3 5 6 Locate facilities Order furniture Furniture setup Interview Remodel Move in 4 Hire and train 7 S AON

Example of Gantt Chart Month 0 2 4 6 8 10 | | | | | 1 3 5 7 9 Activity | | | | | 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 10 Month 1 3 5 7 9

AON Network for House Building Project 1 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

Critical Path Critical path 1 3 2 4 5 6 7 Start Activity Network (Scheduling) Diagrams are used to determine Critical Path. 1 3 2 4 5 6 7 Start A: 1-2-4-7 3 + 2 + 3 + 1 = 9 months B: 1-2-5-6-7 3 + 2 + 1 + 1 + 1 = 8 months C: 1-3-4-7 3 + 1 + 3 + 1 = 8 months D: 1-3-5-6-7 3 + 1 + 1 + 1 + 1 = 7 months Critical path Longest path through a network Minimum project completion time

Activity Start Times 1 3 2 4 5 6 7 Start Starts at 3 months Starts at 6 months Starts at 5 months Starts at 8 months Finishes at 9 months Finish Starts at 0 month Why does Activity six start at 6 months? Because Activity 5 must be completed before activity 6, and activity 2 must be completed before activity 5.

Node Configuration 1 3 Activity duration Activity number 3 Activity duration Activity number Earliest start (ES) Latest start (LS) Latest finish (LF) Earliest finish (EF)

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 duration EF= ES + t

Activity Scheduling

Earliest Activity Start and Finish Times Lay foundation Build house 2 3 5 4 5 8 2 Finish work 3 1 3 7 8 9 Start 3 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

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

Latest Activity Start and Finish Times Lay foundation Build house 2 3 5 4 5 8 2 3 5 Finish work 3 5 8 1 3 7 8 9 Start 3 3 1 8 9 Design house and obtain financing 6 6 7 3 3 4 1 7 8 1 4 5 5 5 6 Select carpet 1 6 7 Order and receive materials Select paint Question: Why is Activity 3’s LF 5?

Activity Slack Slack = LS – ES Slack = LF – EF * Critical Path 9 8 *7 1 7 6 5 *4 4 3 *2 *1 Slack EF LF ES LS Activity Slack = LS – ES or Slack = LF – EF Critical Path Items contain zero slack

Time Estimates Deterministic Probabilistic Time estimates that are fairly certain Probabilistic Estimates of times that allow for variation

Example 1 1 2 3 4 5 6 Deterministic time estimates 6 weeks Locate facilities Order furniture Furniture setup Interview Hire and train Remodel Move in Deterministic time estimates

Example 1 Solution: Deterministic Critical Path

Probabilistic Time Estimates Optimistic time Time required under optimal conditions Pessimistic time Time required under worst conditions Most likely time Most probable length of time that will be required

Expected Time te = to + 4tm +tp 6 te = expected time (“t” in example) to = optimistic time (“a” in example) tm = most likely time (“m” in example) tp = pessimistic time (“b” in example)

Variance (tp – to)2 2 = 36 2 = variance to = optimistic time 2 = (tp – to)2 36 2 = variance to = optimistic time tp = pessimistic time

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

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 Activity a, m, b

Activity Time Estimates 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 0.44 10 1 4 7 4 1.00 11 1 10 13 9 4.00 TIME ESTIMATES (WKS) MEAN TIME VARIANCE ACTIVITY a m b t б2  

Activity Early, Late Times & Slack

Earliest, Latest, and Slack Critical Path 2-5-8-11; Project Duration = 6+3+7+9 = 25

Total Project Variance 2 = б22 + б52 + б82 + б112 2 = 1.00 + 0.11 + 1.78 + 4.00 = 6.89 weeks Key point to remember – to calculate project variance, we need to add the variances of each activities on the critical path.

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 -  

Normal Distribution of Project Time  = tp Time x Z Probability

Previous Example What is probability that project is completed within 30 weeks?  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = 1.91 x -   30 - 25 2.62 From Table of Area under Normal Curve (appendix B, table A) a Z score of 1.91 corresponds to a probability of 0.4719. Thus P(x≤30) = 0.4719 + 0.5000 = 0.9719  = 25 Time (weeks) x = 30 P(x  30 weeks) Length of Critical Path

Same Example What is probability that project is completed within 22 weeks?  2 = 6.89 weeks  = 6.89  = 2.62 weeks Z = = = -1.14 x -   22 - 25 2.62 From Table of Area under Normal Curve (appendix B, table A) a Z score of -1.14 corresponds to a probability of 0.1271  = 25 Time (weeks) x = 22 P(x  22 weeks) = 0.1271 0.3729

Time-cost Trade-offs: Crashing Crash – shortening activity duration Procedure for crashing Crash the project one period at a time Only an activity on the critical path Crash the least expensive activity Multiple critical paths: find the sum of crashing the least expensive activity on each critical path

Time-Cost Trade-Offs: Crashing

Project Crashing Example Project costs are $1000/day 6 a 4 d 5 c 10 b 9 e 2 f

Project Crashing Solution Find the critical path: Rank the critical path activities in order of lowest crashing cost, and determine the number of days that can be crashed Normal time – crash time

Project Crashing Solution Crash the project, one day at a time. After each crash, re-check the critical path. Crash activity c one day for $300. Length of critical path in now 19 days. Activity c cannot be crashed any more (only had 1 day available for crashing). Crash activity e one day for $600. Length of critical path is now 18 days – same as path a-b-f. Both paths are now critical. We must shorten both paths for further improvement

Project Crashing Solution Remaining activities for crashing and costs: Analysis: Should we crash f? f is on both paths, and crashing cost is $800 per day. Alternatively, we may crash b ($500/day) and e ($600/day) to reduce 1 day. But the combined cost is $1100.

Project Crashing Solution Crash f. Project duration is now 17 days. Analysis: can we crash any more activities? Cost is crash b is $500 and cost to crash e is $600, added together ($1100) exceeds the project daily cost of $1000. Conclusion: no more crashing is feasible. Summary:

Advantages of PERT Forces managers to organize Provides graphic display of activities Identifies Critical activities Slack activities 1 2 3 4 5 6

Limitations of PERT Important activities may be omitted Precedence relationships may not be correct Estimates may include a fudge factor May focus solely on critical path 1 2 3 4 5 6 142 weeks

Project Management Software Computer aided design (CAD) Groupware (Lotus Notes) CA Super Project Harvard Total Manager MS Project Sure Track Project Manager Time Line

Project Risk Management Risk: occurrence of events that have undesirable consequences Delays Increased costs Inability to meet specifications Project termination

Risk Management Identify potential risks Analyze and assess risks Work to minimize occurrence of risk Establish contingency plans

Summary Projects are a unique set of activities Projects go through life cycles PERT and CPM are two common techniques Network diagrams Project management software available

QUIZ ON PROJECT MANAGEMENT NEXT SESSION: QUIZ ON PROJECT MANAGEMENT (Closed book) (Bring an equation sheet – must conform to policy)