Managing Projects Chapter 10

What is a Project? A project has a unique purpose A project is temporary A project requires resources A project should have a primary sponsor or customer A project involves uncertainty

What is Project Management? The application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements

Benefits of Project Management Better coordination among functional areas Ensure that tasks are completed even when there is personnel turnover Minimize the need for continuous reporting Identification of realistic time limits Early identification of problems Improved estimating capability Easier to monitor success

Measures of Project Success Completed on-time Completed within budget Delivery of required specifications Acceptance by customer Minimum number of scope changes (change orders)

What do Project Manager do? Manage the people and resources necessary to meet scope, time, cost, and quality goals Reinforce excitement in the project Manage conflict Empower team members Encourage risk taking and creativity Communicate the progress of the team with managers and customers

Building the Project Team Forming Storming Norming Performing

Quantitative Tools Gantt Charts Project Network Diagram PERT uses AON (Activity on Node) methodology Many software programs (i.e., MS Project) use boxes and arrows to display activities

Quantitative Analyses Constructing PERT diagrams and analyzing the critical path Developing cost-time trade-off slopes Incorporating uncertainty into activity times

Constructing PERT Diagrams Baking a Cake Example ActivityCodeImmediate Predecessor Duration (minutes) Preheat ovenA-1.0 Measure ingredientsBA8.0 Mix ingredients for frostingCB5.0 Mix ingredients for cakeDB5.0 Pour batter into cake panED1.0 BakeFE30.0 Cool cakeGC, F60.0 Frost cakeHG5.0

PERT A1A1 B8B8 C5C5 D5D5 E1E1 F 30 G 60 H5H5 Note: * Notation represents the activity code and the expected duration (t) * Critical Path = A-B-D-E-F-G-H = 110 minutes

Notation for Critical Path Analysis ItemSymbolDefinition Activity durationtThe expected duration of an activity Early startESThe earliest time an activity can begin if all previous activities are begun at their earliest times Early finishEFThe earliest time an activity can be completed if it is started at its early start time Late startLSThe latest time an activity can begin without delaying the completion of the project Late finishLFThe latest time an activity can be completed if it is started at its latest start time Total slackTSThe amount of time an activity can be delayed without delaying the completion of the project

PERT A1A1 B8B8 C5C5 D5D5 E1E1 F 30 G 60 H5H5 ES = 0 EF = 0+1=1 ES = 1 EF = 1+8=9 ES = 9 EF = 9+5=14 ES = 9 EF = 9+5=14 ES = 14 EF = 15 ES = 15 EF = 45 ES = 45 (larger of 45, 14) EF = 105 ES = 105 EF = 110 Begin at 1 st activity and make ES = 0 ES = EF predecessor (if more than 1 EF predecessor then use the largest value) EF = ES + t

PERT A1A1 B8B8 C5C5 D5D5 E1E1 F 30 G 60 H5H5 LS = 0 LF = 1 LS = 1 LF = 9 (smaller of 40, 9) LS = 40 LF = 45 LS = 9 LF = 14 LS = 14 LF = 15 LS = 15 LF = 45 LS = (105-60)=45 LF = LS successor =105 LS = (LF-t) =(110-5)=105 LF = EF = 110 Begin at last activity and make LF=EF = 110 LF = LS successor (If more than 1 LF = LS successor then use the smallest value) LS = LF-t

PERT ActivityESEFLSLFTS A01010 B19190 C D E F G H Total Slack (TS) = LS-ES or LF-EF Activities that have zero slack are critical, meaning they cannot be delayed without delaying the project completion time

Gantt Chart See either: Demonstration in MS Project Hardcopy distributed in class

Project Network Diagram (produced by MS Project) See either: Demonstration in MS Project Hardcopy distributed in class

Tennis Tournament Example ActivityCodeImmediate PredecessorEstimated Duration (days) Negotiate for locationA-2 Contact seeded playersB-8 Plan promotionCA3 Locate officialsDC2 Send RSVP invitationsEC10 Sign player contractsFB,C4 Purchase balls and trophiesGD4 Negotiate cateringHE,F1 Prepare locationIE,G3 TournamentJH,I2

Tennis Tournament Example PERT Possible paths: A-C-D-G-I-J (16), A-C-F-H-J (12), A-C-E-I-J (20), A-C-E-H-J (18), B-F-H-J (15) Critical path = A-C-E-I-J (20)

Tennis Tournament Example PERT ActivityESEFLSLFTS A B C D E F G H I J

Gantt Chart See either: Demonstration in MS Project Figure 10.8 in textbook

Project Network Diagram (produced by MS Project) See either: Demonstration in MS Project Figure 10.9 in textbook

Trades-Offs Cost and Time Cost and time are inversely related As time to complete a project goes down, costs for the project go up As time goes up, costs go down

Project Costs

Activity Crashing An activity is considered to be “crashed” when it is completed in less time than is normal by applying additional labor or equipment

Determining the Impact of Activity Crashing To determine the impact of activity crashing begin by identifying the Expedite-Cost Slope for each activity To do this, a manager must identify “normal” and “crash” time and cost estimates

Tennis Tournament Example Cost and Time Estimates *Slope = Crash Cost – Regular Cost (15 – 5) = 10 = 10 Normal Duration – Crash Duration (2 – 1) 1

Activity Cost-Time Trade-off (Activity Code E) Activity E: Normal Time = 10, Crash Time = 6, Normal Cost = $20, Crash Cost = $40)

Incorporating Uncertainty into Activity Times When a manager is unsure of the activity duration times, he/she needs to estimate activity times using a Beta distribution The Beta distribution allows the manager to develop a probable range of times in which the activity time will fall

Beta Distribution of Activity Duration

Beta Distribution Time Estimates Optimistic Time (A) – activity duration if no problems occur Most Likely Time (M) – activity duration that is most likely to occur Pessimistic Time (B) – activity duration if extraordinary problems arise

Formulas Activity time (t) = (A + 4M + B)/6 Standard deviation (σ) = (B - A)/6 Variance (σ 2 ) = (B – A) 2 /36

Assessing Probability Tennis Tournament Example Let’s say we plan to begin the tennis tournament project on October 25 th and plan to have it completed within 24 days (November 18 th ) because the tennis stadium is booked after that. As a manager, you have estimated the optimistic, most likely, and pessimistic times for each activity Now you want to find the probability that you will be able to finish the project in 24 days

Time Estimates Tennis Tournament Example Time Estimates ActivityAMBtσσ2σ2 A B C D E F G H I J

Time Estimates – Critical Path Tennis Tournament Example ∑t = = 20 days ∑σ 2 = = 5.22 days ∑σ = = 3.66

Building Time Distribution Tennis Tournament Example Z = (X – μ)/σ Z = (24 – 20)/√5.22 Z = 1.75 Z Table (p. 579 of textbook) shows that a Z value of 1.75 refers to a probability of ( – )= or.04 Therefore, there is a 4% probability that the project would not be completed in 24 days