© 2006 Prentice Hall, Inc.3 – 1 Operations Management Chapter 3 – Project Management Chapter 3 – Project Management © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render Operations Management, 8e

© 2006 Prentice Hall, Inc.3 – 2 Strategic Importance of Project Management  Microsoft Windows Longhorn Project :  hundreds of programmers  millions of lines of code  millions of dollars cost  Ford Redesign of Mustang Project:  450 member project team  Cost $700-million  25% faster and 30% cheaper than comparable project at Ford

© 2006 Prentice Hall, Inc.3 – 3 Definition of Project Management  Projects are inter-related activities that are structured to achieved a pre-defined objective by a certain deadline under constraints of manpower, money and time.

© 2006 Prentice Hall, Inc.3 – 4 Project Management Activities  Planning - goal setting, defining the project, team organization  Scheduling - relates people, money, and supplies to specific activities and activities to each other  Controlling - monitors resources, costs, quality, and budgets; revises plans and shifts resources to meet time and cost demands

© 2006 Prentice Hall, Inc.3 – 5 Project Management Activities  Planning - goal setting, defining the project, team organization  What is to be done? (build, modify and repair)  When is goal to be done? (Milestones)  First phase completion 2008  Second phase 2010  Third phase 2015  Who will manage the work? (project organization)

© 2006 Prentice Hall, Inc.3 – 6 Gantt Chart Project View Time Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

© 2006 Prentice Hall, Inc.3 – 7 Project Planning, Scheduling, and Controlling Figure 3.1 BeforeStart of projectDuring projectTimelineproject Budgets Delayed activities report Slack activities report Time/cost estimates Budgets Engineering diagrams Cash flow charts Material availability details CPM/PERT Gantt charts Milestone charts Cash flow schedules

© 2006 Prentice Hall, Inc.3 – 8 A Sample Project Organization Test Engineer Mechanical Engineer Project 1 Project Manager Technician Project 2 Project Manager Electrical Engineer Computer Engineer Marketing Finance Human Resources Design Quality Mgt Production President Figure 3.2

© 2006 Prentice Hall, Inc.3 – 9 Work Breakdown Structure Figure 3.3 Level ID LevelNumberActivity 11.0Develop/launch Windows Longhorn OS 21.1Development of GUIs 21.2Ensure compatibility with earlier Windows versions 31.21Compatibility with Windows ME 31.22Compatibility with Windows XP 31.23Compatibility with Windows Ability to import files

© 2006 Prentice Hall, Inc.3 – 10 Scheduling Activities  Scheduling is the process of assigning, project phases, major tasks and activities to the time frame expected of the projects. - How is the project phases to completed?  Work backwards  Identify activities to be done and their durations  Establish relationships between activities

© 2006 Prentice Hall, Inc.3 – 11 Project Scheduling Activities (I) 1.Assignments of work and activities 1.Major tasks to project phases 2.Subtasks to major tasks 3.Activities to subtasks 2.Assignments of normal times 1.Normal times to major tasks 2.Normal times to subtasks 3.Normal times to activities 3.Assignments of normal costs 1.Normal costs to major tasks 2.Normal costs to subtasks 3.Normal costs to activities 4.Assignment of relevant estimation details 1.Standard deviation, probability added to activities, subtasks and project phases 5.Assignments of crash times 6.Assignments of crash costs

© 2006 Prentice Hall, Inc.3 – 12  Gantt chart  Critical Path Method (CPM)  Program Evaluation and Review Technique (PERT) Project Management Techniques

© 2006 Prentice Hall, Inc.3 – 13 Passengers Baggage Fueling Cargo and mail Galley servicing Lavatory servicing Drinking water Cabin cleaning Cargo and mail Flight services Operating crew Baggage Passengers Deplaning Baggage claim Container offload Pumping Engine injection water Container offload Main cabin door Aft cabin door Aft, center, forward Loading First-class section Economy section Container/bulk loading Galley/cabin check Receive passengers Aircraft check Loading Boarding Minutes Service For A Delta Jet Figure 3.4

© 2006 Prentice Hall, Inc.3 – 14 Project Control Reports  Detailed cost breakdowns for each task  Total program labor curves  Cost distribution tables  Functional cost and hour summaries  Raw materials and expenditure forecasts  Variance reports  Time analysis reports  Work status reports

© 2006 Prentice Hall, Inc.3 – 15  Network techniques  Developed in 1950’s  CPM by DuPont for chemical plants (1957)  PERT by Booz, Allen & Hamilton with the U.S. Navy, for Polaris missile (1958)  Consider precedence relationships and interdependencies  Each uses a different estimate of activity times PERT and CPM

© 2006 Prentice Hall, Inc.3 – 16 Six Steps PERT & CPM 1.Define the project and prepare the work breakdown structure 2.Develop relationships among the activities - decide which activities must precede and which must follow others 3.Draw the network connecting all of the activities 4.Assign time and/or cost estimates to each activity 5.Compute the longest time path through the network – this is called the critical path 6.Use the network to help plan, schedule, monitor, and control the project

© 2006 Prentice Hall, Inc.3 – 17 1.When will the entire project be completed? 2.What are the critical activities or tasks in the project? 3.Which are the noncritical activities? 4.What is the probability the project will be completed by a specific date? 5.Is the project on schedule, behind schedule, or ahead of schedule? 6.Is the money spent equal to, less than, or greater than the budget? 7.Are there enough resources available to finish the project on time? 8.If the project must be finished in a shorter time, what is the way to accomplish this at least cost? Questions PERT & CPM Can Answer

© 2006 Prentice Hall, Inc.3 – 18 A Comparison of AON and AOA Network Conventions Activity onActivityActivity on Node (AON)MeaningArrow (AOA) A comes before B, which comes before C (a) A B C BAC A and B must both be completed before C can start (b) A C C B A B B and C cannot begin until A is completed (c) B A C A B C Figure 3.5

© 2006 Prentice Hall, Inc.3 – 19 A Comparison of AON and AOA Network Conventions Activity onActivityActivity on Node (AON)MeaningArrow (AOA) C and D cannot begin until A and B have both been completed (d) A B C D B AC D C cannot begin until both A and B are completed; D cannot begin until B is completed. A dummy activity is introduced in AOA (e) CA BD Dummy activity A B C D Figure 3.5

© 2006 Prentice Hall, Inc.3 – 20 AON Example ActivityDescription Immediate Predecessors A Build internal components — B Modify roof and floor — C Construct collection stack A D Pour concrete and install frame A, B E Build high-temperature burner C F Install pollution control system C G Install air pollution device D, E H Inspect and test F, G Milwaukee Paper Manufacturing's Activities and Predecessors Table 3.1

© 2006 Prentice Hall, Inc.3 – 21 AON Network for Milwaukee Paper G E F H C A Start DB Arrows Show Precedence Relationships Figure 3.8

© 2006 Prentice Hall, Inc.3 – 22H (Inspect/ Test) 7 Dummy Activity AOA Network for Milwaukee Paper 6 F (Install Controls) E (Build Burner) G (Install Pollution Device) 5 D (Pour Concrete/ Install Frame) 4C (Construct Stack) B (Modify Roof/Floor) A (Build Internal Components) Figure 3.9

© 2006 Prentice Hall, Inc.3 – 23 Determining the Project Schedule Perform a Critical Path Analysis  The critical path is the longest path through the network  The critical path is the shortest time in which the project can be completed  Any delay in critical path activities delays the project  Critical path activities have no slack time

© 2006 Prentice Hall, Inc.3 – 24 Determining the Project Schedule Perform a Critical Path Analysis ActivityDescriptionTime (weeks) ABuild internal components2 BModify roof and floor3 CConstruct collection stack2 DPour concrete and install frame4 EBuild high-temperature burner4 FInstall pollution control system 3 GInstall air pollution device5 HInspect and test2 Total Time (weeks)25 Table 3.2

© 2006 Prentice Hall, Inc.3 – 25 Determining the Project Schedule Perform a Critical Path Analysis Table 3.2 ActivityDescriptionTime (weeks) ABuild internal components2 BModify roof and floor3 CConstruct collection stack2 DPour concrete and install frame4 EBuild high-temperature burner4 FInstall pollution control system 3 GInstall air pollution device5 HInspect and test2 Total Time (weeks)25 Earliest start (ES) =earliest time at which an activity can start, assuming all predecessors have been completed Earliest finish (EF) =earliest time at which an activity can be finished Latest start (LS) =latest time at which an activity can start so as to not delay the completion time of the entire project Latest finish (LF) =latest time by which an activity has to be finished so as to not delay the completion time of the entire project

© 2006 Prentice Hall, Inc.3 – 26 Determining the Project Schedule Perform a Critical Path Analysis Figure 3.10 A Activity Name or Symbol Earliest Start ES Earliest Finish EF Latest Start LS Latest Finish LF Activity Duration 2

© 2006 Prentice Hall, Inc.3 – 27 Critical Path for Milwaukee Paper Figure 3.13 E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A

© 2006 Prentice Hall, Inc.3 – 28 ES – EF Gantt Chart for Milwaukee Paper ABuild internal components BModify roof and floor CConstruct collection stack DPour concrete and install frame EBuild high- temperature burner FInstall pollution control system GInstall air pollution device HInspect and test

© 2006 Prentice Hall, Inc.3 – 29 LS – LF Gantt Chart for Milwaukee Paper ABuild internal components BModify roof and floor CConstruct collection stack DPour concrete and install frame EBuild high- temperature burner FInstall pollution control system GInstall air pollution device HInspect and test

© 2006 Prentice Hall, Inc.3 – 30 Activity: Activity Times Calculation ActivityNormal Subtask Major Times assign tasks A10 RRI B20SSII C15TTIII D5TTIII E30TTIII F40 UU II G20VVII H10 WWIII I15 WWIII J20XXII K 30 XX II I 60 YY IV Calculate the duration times for each subtask and major task

© 2006 Prentice Hall, Inc.3 – 31 Activity: Activity Times Calculation ActivityNormal Immediate times predecessors Subtasks A10-I B20AII C15AIII D5CIII E30CIII F40BII G20FII H10 D, EIII I15HIII J20FII K 30 G, J II L 60 K, I IV Create the project relationship for the activity-level data provided. Calculate slack times. Use bottom-up Approach.

© 2006 Prentice Hall, Inc.3 – 32 Activity: Subtasks Network Calculation ActivityNormal Immediate times predecessors Subtasks A10-I B20AII C15AIII D5CIII E30CIII F40BII G20FII H10 D, EIII I15HIII J20FII K 30 G, J II L 60 K, I IV Create the project relationship for the subtasks-level data provided. Calculate slack times. Use bottom-up Approach.

© 2006 Prentice Hall, Inc.3 – 33  CPM assumes we know a fixed time estimate for each activity and there is no variability in activity times  PERT uses a probability distribution for activity times to allow for variability Variability in Activity Times

© 2006 Prentice Hall, Inc.3 – 34 Trade-Offs And Project Crashing  The project is behind schedule  The completion time has been moved forward It is not uncommon to face the following situations: Shortening the duration of the project is called project crashing

© 2006 Prentice Hall, Inc.3 – 35 Steps in Project Crashing 1.Compute the crash cost per time period. If crash costs are linear over time: Crash cost per period = (Crash cost – Normal cost) (Normal time – Crash time) 2.Using current activity times, find the critical path and identify the critical activities

© 2006 Prentice Hall, Inc.3 – 36 Steps in Project Crashing 3.If there is only one critical path, then select the activity on this critical path that (a) can still be crashed, and (b) has the smallest crash cost per period. If there is more than one critical path, then select one activity from each critical path such that (a) each selected activity can still be crashed, and (b) the total crash cost of all selected activities is the smallest. Note that a single activity may be common to more than one critical path.

© 2006 Prentice Hall, Inc.3 – 37 Steps in Project Crashing 4.Update all activity times. If the desired due date has been reached, stop. If not, return to Step 2.

© 2006 Prentice Hall, Inc.3 – 38 Crashing The Project Time (Wks)Cost ($)Crash CostCritical ActivityNormalCrashNormalCrashPer Wk ($)Path? A2122,00022,750750Yes B3130,00034,0002,000No C2126,00027,0001,000Yes D4248,00049,0001,000No E4256,00058,0001,000Yes F3230,00030,500500No G5280,00084,5001,500Yes H2116,00019,0003,000Yes Table 3.5

© 2006 Prentice Hall, Inc.3 – 39 Crash and Normal Times and Costs for Activity B ||| 123Time (Weeks) $34,000 $34,000 — $33,000 $33,000 — $32,000 $32,000 — $31,000 $31,000 — $30,000 $30,000 — — Activity Cost CrashNormal Crash Time Normal Time Crash Cost Normal Cost Crash Cost/Wk = Crash Cost – Normal Cost Normal Time – Crash Time = $34,000 – $30,000 3 – 1 = = $2,000/Wk $4,000 2 Wks Figure 3.18

© 2006 Prentice Hall, Inc.3 – 40 Activities: Calculation of Linear Cost Crashing Patterns Calculate the linear cost crashing patterns for activities C, D, E and F.

© 2006 Prentice Hall, Inc.3 – 41 Critical Path And Slack Times For Milwaukee Paper Figure 3.19 E4E4 F3F3 G5G5 H2H D4D4 37 C2C2 24 B3B3 03 Start A2A Slack = 1 Slack = 0 Slack = 6 Slack = 0

© 2006 Prentice Hall, Inc.3 – 42 1.Project activities have to be clearly defined, independent, and stable in their relationships 2.Precedence relationships must be specified and networked together 3.Time estimates tend to be subjective and are subject to fudging by managers 4.There is an inherent danger of too much emphasis being placed on the longest, or critical, path Limitations of PERT/CPM

© 2006 Prentice Hall, Inc.3 – 43 Using Microsoft Project Program 3.1

© 2006 Prentice Hall, Inc.3 – 44 Using Microsoft Project Program 3.2

© 2006 Prentice Hall, Inc.3 – 45 Using Microsoft Project Program 3.3

© 2006 Prentice Hall, Inc.3 – 46 Using Microsoft Project Program 3.4

© 2006 Prentice Hall, Inc.3 – 47 Using Microsoft Project Program 3.5

© 2006 Prentice Hall, Inc.3 – 48 Using Microsoft Project Program 3.6

© 2006 Prentice Hall, Inc.3 – 49 Using Microsoft Project Program 3.7