Project Management Chapter 17

Learning Objectives You should be able to: Discuss the behavioral aspects of projects in terms of project personnel and the project manager Explain the nature and importance of a work breakdown structure in project management Give a general description of PERT/CPM techniques Construct simple network diagrams List the kinds of information that a PERT or CPM analysis can provide Analyze networks with deterministic times Describe activity ‘crashing’ and solve typical problems Instructor Slides

Projects Project: Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame Examples: The Olympic Games Producing a movie Product development Operations: work done to sustain the business 17-3

Project Life Cycle 17-4

The Triple Constraint of Project Management Project’s Triple Constraints (Key Metrics) Time Cost Scope (Performance objectives) Quality Information Technology Project Management, Sixth Edition

Project Success There are several ways to define project success: The project met scope, time, and cost goals The project satisfied the customer/sponsor The results of the project met its main objective e.g., making or saving a certain amount of money, providing a good return on investment. Information Technology Project Management, Sixth Edition

Project Manager Project managers work with the project team and other people involved in a project to meet project goals The project manager is ultimately responsible for the success or failure of the project The project manager skills and competencies: People skills Leadership Listening Integrity, ethical behavior, consistent Strong at building trust Verbal communication Strong at building teams Conflict resolution, conflict management Critical thinking, problem solving Understands, balances priorities 17-7

Project Management Key tools: Work Breakdown Structure Gantt charts Network diagram

Work Breakdown Structure (WBS) A hierarchical listing of what must be done during a project Establishes a logical framework for identifying the required activities for the project Identify the major elements of the project Identify the major supporting activities for each of the major elements Break down each major supporting activity into a list of the activities that will be needed to accomplish it 17-9

WBS 17-10 Open new department New facility Finance Staff Furniture Location Relocating Hiring Remodel Move in Locate facility Order furniture Furniture setup interview Hire & train 17-10

Critical Path Method (CPM) CPM can assist in: estimating project length Identifying which activities are most critical to timely project completion indicating of how long any activity can be delayed without delaying the project 17-11

Network Diagram Network diagram (Precedence) Diagram of project activities that shows sequential relationships by use of arrows and nodes Activity on arrow (AOA) Network diagram convention in which arrows designate activities Activity on node (AON) Network convention in which nodes designate activities 17-12

Network Conventions (AON) b c d dummy Node (dummy) Start Node

Network Conventions (AOA) b c d dummy Activity

Immediate Predecessor Precedence Diagram # Task Duration (weeks) Immediate Predecessor 1 Locate facility 8 - 2 Order furniture 6 3 Interview 4 Hire & Train 9 5 Remodel 11 Furniture setup 7 Move in 4,5,6

Project Network – Activity on Node (AON) # Task Immediate Predecessor 1 Locate facility - 2 Order furniture 3 Interview 4 Hire & Train 5 Remodel 6 Furniture setup 7 Move in 4,5,6 Order furniture 2 Furniture setup Locate facilities 1 6 Move in Remodel S 5 7 Hire and train Interview 3 4

Project Network – Activity on Arrow (AOA) # Task Immediate Predecessor 1 Locate facility - 2 Order furniture 3 Interview 4 Hire & Train 5 Remodel 6 Furniture setup 7 Move in 4,5,6 Order furniture Furniture setup Locate facilities Remodel Move in Interview Hire and train

Gantt Chart 17-18

Critical Path Method (CPM) 9-19 An analytical tool that provides a schedule that completes the project in minimum time subject to the precedence constraints. In addition, CPM provides: Starting and ending times for each activity Identification of the critical activities (i.e., the ones whose delay necessarily delay the project). Identification of the non-critical activities, and the amount of slack time available when scheduling these activities.

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 a path; the difference the length of path and the length of critical path

Project Network – Activity on Node (AON) Critical Path ? # Task Immediate Predecessor 1 Locate facility - 2 Order furniture 3 Interview 4 Hire & Train 5 Remodel 6 Furniture setup 7 Move in 4,5,6 Order furniture 2 Furniture setup Locate facilities 1 6 Move in Remodel S 5 7 Hire and train Interview 3 4

Gantt Chart Critical Path ? 17-22

Example 6 3 B C 8 A 11 1 D S G 4 9 E F

Early Start, Early Finish Early start (ES) The earliest time an activity can start Assumes all preceding activities start as early as possible For nodes with one entering arrow ES = EF of the entering arrow For activities leaving nodes with multiple entering arrows ES = the largest of the entering EF Early finish (EF) The earliest time an activity can finish EF = ES + t Finding ES (Early Start) and EF (Early Finish) involves a forward pass through the network diagram 17-24

Example – Forward pass (ES, EF) 6 8 14 3 14 17 B C 8 8 A 11 8 19 1 D 19 20 S G 4 4 9 4 13 E F

Late Start, Late Finish Late Finish (LF) The latest time the activity can finish and not delay the project For nodes with one leaving arrow, LF for nodes entering that node equals the LS of the leaving arrow For nodes with multiple leaving arrows, LF for arrows entering node equals the smallest of the leaving arrows Late Start (LS) The latest time the activity can start and not delay the project The latest starting time for each activity is equal to its latest finishing time minus its expected duration: LS = LF - t Finding LS and LF involves a backward pass through the network diagram 17-26

Example – Backward pass (LS, LF) 10 16 16 19 8 6 14 14 3 17 B 8 C 0 8 8 A 8 19 19 20 8 11 19 0 0 0 19 1 20 D S G 6 10 10 19 0 4 4 4 9 13 E F

Slack and the Critical Path Slack can be computed one of two ways: Slack = LS – ES Slack = LF – EF Critical path The critical path is indicated by the activities with zero slack 17-28

Example – Slack (LS-ES,LF-EF) 10 16 8 6 14 2 16 19 14 3 17 2 B 0 8 0 8 8 C A 8 19 8 11 19 19 20 0 0 0 0 0 D 19 1 20 S G 6 10 0 4 4 6 10 19 4 9 13 6 E F

Example – Critical Path Slack (LS-ES;LF-EF)=0 2 2 B C A D S G 6 6 E F

Example Solution Path Length (weeks) Slack S-A-B-C-G 18 2 S-A-D-G 20 Critical Path Path Length (weeks) Slack S-A-B-C-G 18 2 S-A-D-G 20 S-E-F-G 14 6

Using Slack Times Knowledge of slack times provides managers with information for planning allocation of scarce resources Control efforts can be directed toward those activities that might be most susceptible to delaying the project Activity slack times are based on the assumption that all of the activities on the same path will be started as early as possible and not exceed their expected time If two activities are on the same path and have the same slack, this will be the total slack available to both 17-32

The Critical Path Method (CPM) is not useful for (Multiple Choices Question): Finding the project’s shortest completion time Finding the project’s minimum cost Calculating start and end times for all activities Identifying critical activities Identifying the slack for non-critical activities

Time-Cost Trade-Offs Activity time estimates are made for some given level of resources It may be possible to reduce the duration of a project by injecting additional resources Motivations: To avoid late penalties Monetary incentives Free resources for use on other projects 17-34

Time-Cost Trade-Offs: Crashing Shortening activity durations Typically, involves the use of additional funds to support additional personnel or more efficient equipment, and the relaxing of some work specifications The project duration may be shortened by increasing direct expenses, thereby realizing savings in indirect project costs

Crashing Activities 17-36

Crashing Decisions To make decisions concerning crashing requires information about: Time: Regular time and crash time estimates for each activity Cost: Regular cost and crash cost estimates for each activity A list of activities that are on the critical path Critical path activities are potential candidates for crashing Crashing non-critical path activities would not have an impact on overall project duration 17-37

Crashing: Procedure General procedure: Crash the project one period at a time Crash only activities on the critical path/s Crash the least expensive activity (that is on the critical path) When there are multiple critical paths, find the sum of crashing the least expensive activity on each critical path If two or more critical paths share common activities, compare the least expensive cost of crashing a common activity shared by critical paths with the sum for the separate critical paths 17-38

Example 7 6 a 4 d 5 c 10 b 9 e 2 f

Indirect costs: $1,000 / day Activity Normal time [days] Crash (min) time Available time (crash-normal) Cost to Crash [$/day] a 6 - b 10 8 2 500 c 5 4 1 300 d 3 700 e 9 7 600 f 800

1. Determine Critical Path 6 a 4 d 5 c 10 b 9 e 2 f 1. Determine Critical Path Path Length a-b-f 18 c-d-e-f 20 (critical path) 2. Rank activities on CP in order of lowest crashing cost Activity Cost per day to crash Available days c 300 1 e 600 2 d 700 3 f 800 1 Activity Normal time [days] Crash (min) time Available time (crash-normal) Cost to Crash [$/day] a 6 - b 10 8 2 500 c 5 4 1 300 d 3 700 e 9 7 600 f 800

2. Rank activities on CP in order of lowest crashing cost Activity Cost per day to crash Available days c 300 1 e 600 2 d 700 3 f 800 1 Crash activity c by 1 day: cost $300 < $1,000 (CP=19 days) (cannot crash c anymore) 6 a 4 d 5 c 10 b 9 e 2 f 5 4

2. Rank activities on CP in order of lowest crashing cost Crash activity e by 1 day: cost $600 < $1,000 (CP=18 days) (may crash activity e by 1 more day) 2. Rank activities on CP in order of lowest crashing cost Activity Cost per day to crash Available days c 300 1 e 600 2 d 700 3 f 800 1 6 a 4 d 5 c 10 b e 2 f 4 8 9 Both paths are now critical. Have to crash both in order to shorten project.

Both paths are now critical. 6 a 4 d c 10 b 8 e 2 f Both paths are now critical. Have to crash both in order to shorten project. Remaining activities Path Activity Cost per day to crash Available days a-b-f a - - b 500 2 f 800 1 c-d-e-f c - - e 600 1 d 700 3 Crash activity f (is on both paths) by 1 day: cost = $800 < $1,000 (CP=17 days)

Crash activity f (is on both paths) by 1 day: cost $800 < $1,000 (CP=17 days) Remaining activities Path Activity Cost per day to crash Available days a-b-f a - - b 500 2 f 800 1 c-d-e-f c - - e 600 1 d 700 3 6 a 4 d c 10 b 8 e 1 f 2

Remaining activities 10 6 b Both paths are still critical. a 4 d c 10 b 8 e 1 f Both paths are still critical. Have to crash both in order to shorten project. Remaining activities Path Activity Cost per day to crash Available days a-b-f a - - b 500 2 f - - c-d-e-f c - - e 600 1 d 700 3 Crash activity b by 1 day: cost $500 AND Crash activity e by 1 day: cost $600 Total cost: $1,100>$1,000 (indirect costs) =>DONE!

Length after crashing Path\crash n=0 1 2 3 a-b-f 18 18 18 17 c-d-e-f 20 19 18 17 Activity Crashed c e f Cost 0 ($300) ($600) ($800) Savings 0 $1,000 $1,000 $1,000 Total 0 $700 +$400 +$200 = $1,300

Operations Strategy* Projects present both strategic opportunities and risks It is critical to devote sufficient resources and attention to projects Projects are often employed in situations that are characterized by significant uncertainties and risks that may result in: Delays Budget overruns Failure PM should use: Careful planning Wise selection of project manager and team Monitoring of the project It is not uncommon for projects to fail it is beneficial to examine the reasons for failure – “lessons learned” 17-48