Chapter 3 Project Management

OBJECTIVES Definition of Project Management Work Breakdown Structure 3-2 OBJECTIVES Definition of Project Management Work Breakdown Structure Project Control Charts Structuring Projects Critical Path Scheduling 2

Building: a ship, a satellite, an oil rig, and a nuclear plant. 3-3 Project Examples Building: a ship, a satellite, an oil rig, and a nuclear plant. Developing: computer programs, an advertising campaign, a new product, a new process, and training materials. Implementing: new technologies and work procedures.

3-4 Project Management Defined A Project is a series of related jobs usually directed toward some major output and requiring a significant period of time to perform Project Management are the management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project 3

Objectives of a Project 3-5 Objectives of a Project

Objectives of a Project 3-6 Objectives of a Project The 4th dimension: client satisfaction

3-7 Project Life Cycle Project Life Cycle: changing patterns of resource usage and level of activity over the course of the project

Stages of a Conventional Project: 3-8 Project Life Cycle Stages of a Conventional Project: Slow beginning Buildup of size Peak Begin a decline Termination

3-9 Project Life Cycle

3-10 Project Life Cycle Time distribution of project effort is characterized by slow-rapid-slow

3-11 Project Life Cycle Try to avoid the “90-90 rule of project management”: The first 90% of the project takes 90% of the time, the last 10% takes the other 90%.

What does this rule really mean? 3-12 Project Life Cycle What does this rule really mean?

3-13 Project Life Cycle During the life cycle cycle, project management is accomplished through the use of processes such as: Initiating, planning, executing, controlling, and closing Many of these processes are iterative in nature because the project is being progressively elaborated

*Author unknown but believed to have perished in stage 4 3-14 Project Life Cycle An Alternate View* Stage 1: Excitement – Euphoria Stage 2: Disenchantment Stage 3: Search for the Guilty Stage 4: Punishment of the Innocent Stage 5: Distinction for the Uninvolved *Author unknown but believed to have perished in stage 4

Defining Project Objectives 3-15 Defining Project Objectives Defining Project Objectives Why Set Project Objectives To provide direction for project activities To enable measuring results against prior exceptions Resource usage (manpower, materials, etc.) Schedule integrity Quality of work To determine specific goals which will provide maximum effectiveness of project activities

Requirements for Project Objectives 3-16 Defining Project Objectives Requirements for Project Objectives Achievable (time, resources, staff) Understandable (vs. complex) Specific (vs. general, vague statements) Tangible (“deliverables”) Measurable (resources, schedule, quality) Consistent (with strategy, programs, policies, procedures) Assignable (department or individual)

Some Problems in Setting Objectives 3-17 Defining Project Objectives Some Problems in Setting Objectives Stating activities rather than deliverables Exceeding the scope of the defined project Failing to be specific Omitting important deliverables Inconsistency with stated policies

Example: D.U. Singer Project 3-18 Defining Project Objectives Example: D.U. Singer Project Title: Permanent Antiseptic Production Start-Up Objectives: Develop a comprehensive plan for the production of a new, permanent antiseptic Complete development and testing of a manufacturing process that: Meets all current FDA, EPA, and OSHA regulations as well as internal specifications produces 95% yield of product (full packaged) at a level of 80% of full production goal of 10 million liters per year

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Another problem in objective setting … 3-20 Another problem in objective setting …

Work Breakdown Structure 3-21 Work Breakdown Structure A work breakdown structure defines the hierarchy of project tasks, subtasks, and work packages Program Project 1 Project 2 Task 1.1 Subtask 1.1.1 Work Package 1.1.1.1 Level 1 2 3 4 Task 1.2 Subtask 1.1.2 Work Package 1.1.1.2 4

Program: New Product Introduction 3-22 Work Breakdown Structure Program: New Product Introduction 1.0 Project 1: Engineering Development 1.1 Task 1: Run pilot test 1.2 Task 2: Review process costs and efficiencies 1.3 Task 3: Prepare Capital Equipment List 2.0 Project 2: Market Survey 2.1 Task 1: Complete Market Survey 2.2 Task 2: Analyze Survey Results 2.3 Task 3: Prepare Marketing Plan

Work Breakdown Structure 3-23 Work Breakdown Structure 3.0 Project 3: Manufacturing Start-up 3.1 Task 1: Install and Test New Equipment 3.2 Task 2: Establish Manufacturing Procedures 3.3 Task 3: Detailed Testing of Initial Output 4.0 Project 4: Sales Force Training 4.1 Task 1: Select Sales People 4.2 Task 2: Select Distributors 4.3 Task 3: Train Sales Force and Distributors

Activity 1 Activity 2 Activity 3 Activity 4 Activity 5 Activity 6 3-24 Gantt Chart Vertical Axis: Always Activities or Jobs Horizontal bars used to denote length of time for each activity or job. Activity 1 Activity 2 Activity 3 Activity 4 Activity 5 Activity 6 Time Horizontal Axis: Always Time 6

Service Activities for A Delta Jet During a 60 Minute Layover 3-25 Service Activities for A Delta Jet During a 60 Minute Layover

Network-Planning Models 3-26 Network-Planning Models A project is made up of a sequence of activities that form a network representing a project The path taking longest time through this network of activities is called the “critical path” The critical path provides a wide range of scheduling information useful in managing a project Critical Path Method (CPM) helps to identify the critical path(s) in the project networks 15

Prerequisites for Critical Path Methodology 3-27 Prerequisites for Critical Path Methodology A project must have: well-defined jobs or tasks whose completion marks the end of the project; independent jobs or tasks; and tasks that follow a given sequence. 16

Types of Critical Path Methods 3-28 Types of Critical Path Methods CPM with a Single Time Estimate Used when activity times are known with certainty Used to determine timing estimates for the project, each activity in the project, and slack time for activities CPM with Three Activity Time Estimates Used when activity times are uncertain Used to obtain the same information as the Single Time Estimate model and probability information Time-Cost Models Used when cost trade-off information is a major consideration in planning Used to determine the least cost in reducing total project time 15

Steps in the CPM with Single Time Estimate 3-29 Steps in the CPM with Single Time Estimate Activity Identification Activity Sequencing and Network Construction Determine the critical path From the critical path all of the project and activity timing information can be obtained 15

CPM with Single Time Estimate 3-30 CPM with Single Time Estimate Consider the following consulting project: Activity Designation Immed. Pred. Time (Weeks) Assess customer's needs A None 2 Write and submit proposal B 1 Obtain approval C Develop service vision and goals D Train employees E 5 Quality improvement pilot groups F D, E Write assessment report G Develop a critical path diagram and determine the duration of the critical path and slack times for all activities.

D(2) E(5) F(5) A(2) B(1) C(1) G(1) First draw the network 3-31 First draw the network Act. Imed. Pred. Time A None 2 B A 1 C B 1 D C 2 D(2) E(5) E C 5 F D,E 5 G F 1 F(5) A(2) B(1) C(1) G(1) 18

The longest path is critical – why? 3-32 Find the Critical Path Activities on the critical path cannot be delayed without delaying the completion of the project There are two paths: A – B – C – D – F – G: 12 weeks A – B – C – E – F – G: 15 weeks Activity D can be delayed by up to 3 weeks without delaying the project The longest path is critical – why?

Determine early starts and early finish times 3-33 Determine early starts and early finish times ES=4 EF=6 D(2) ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 A(2) B(1) C(1) F(5) G(1) ES=4 EF=9 Hint: Start with ES=0 and go forward in the network from A to G. E(5) 21

Determine late starts and late finish times 3-34 Determine late starts and late finish times Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A. ES=4 EF=6 D(2) E(5) ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 LS=7 LF=9 F(5) A(2) B(1) C(1) G(1) ES=4 EF=9 LS=3 LF=4 LS=2 LF=3 LS=0 LF=2 LS=9 LF=14 LS=14 LF=15 LS=4 LF=9 22

ES=4 EF=6 D(2) ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 3-35 Critical Path & Slack ES=4 EF=6 Slack=(7-4)=(9-6)= 3 Wks D(2) ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=9 EF=14 ES=14 EF=15 LS=7 LF=9 F(5) A(2) B(1) C(1) G(1) ES=4 EF=9 LS=3 LF=4 LS=2 LF=3 LS=0 LF=2 LS=9 LF=14 LS=14 LF=15 E(5) LS=4 LF=9 Duration=15 weeks 23

Example 2: Great Valley Hospital Project 3-36 Example 2: Great Valley Hospital Project Activity Description Immed. Preds. A Build internal components - B Modify roof and floor C Construct collection stack D Pour concrete and install frame A, B E Build high-temperature burner F Install pollution control system G Install air pollution device D, E H Inspect and test F, G

Network for Great Valley Hospital Project 3-37 Network for Great Valley Hospital Project 3 Start A B C D E F G H 2 2 2 4 3 5 4 Arrows show precedence relationships

Critical Path for Great Valley Hospital Project 3-38 Critical Path for Great Valley Hospital Project F A C E Start H B D G Arrows show precedence relationships

Critical Path for Great Valley Hospital Project 3-39 Critical Path for Great Valley Hospital Project Four paths in the network: Path 1: Start – A – C – F – H: 9 weeks Path 2: Start – A – C – E – G – H: 15 weeks Path 3: Start – A – D – G – H: 13 weeks Path 4: Start – B – D – G – H: 14 weeks Path 2 is critical See GreatValley.mpp

Critical Path for Great Valley Hospital Project 3-40 Critical Path for Great Valley Hospital Project A, C, E, G, and H are on the critical path and so they have 0 slack B is on path 4, so its slack is 15 – 14 = 1 D is on paths 3 and 4, so its slack is 15 – Max (13,14) = 1 F is on path 1, so its slack is 15 – 9 = 6 An activity can be delayed by its slack and not delay the project completion

Critical Path Analysis Setup 3-41 Critical Path Analysis Setup ES LS EF LF Earliest Finish Latest Start Earliest Start Activity Name Activity Duration Latest Finish

Determine early starts and early finish times 3-42 Critical Path Analysis for Great Valley Hospital Project Determine early starts and early finish times Start A B C D F G H 13 2 15 8 5 4 10 3 7 E 1 Slack=0 Slack=6 Slack=1 Slack=0

Great Valley Gantt Chart: Earliest Start and Finish 3-43 Great Valley Gantt Chart: Earliest Start and Finish Great Valley General Hospital A Build internal components B Modify roof and floor C Construct collection stack D Pour concrete and install frame E Build high-temperature burner F Install pollution control system G Install air pollution device H Inspect and test 1 2 3 4 5 6 7 8 9 10 1112 13 1415 16 This and the following slide illustrate the translation of Early and Late Start and Finish time to Gantt charts.

Example 3. CPM with Three Activity Time Estimates 3-44 Example 3. CPM with Three Activity Time Estimates

Example 3. Expected Time Calculations 3-45 Example 3. Expected Time Calculations ET(A)= 3+4(6)+15 6 ET(A)=42/6=7

Ex. 3. Expected Time Calculations 3-46 Ex. 3. Expected Time Calculations ET(B)= 2+4(4)+14 6 ET(B)=32/6=5.333

Ex 3. Expected Time Calculations 3-47 Ex 3. Expected Time Calculations ET(C)= 6+4(12)+30 6 ET(C)=84/6=14

A(7) B C(14) D(5) E(11) F(7) H(4) G(11) I(18) 3-48 Example 3. Network A(7) B (5.333) C(14) D(5) E(11) F(7) H(4) G(11) I(18) Duration = 54 Days

What is the probability of finishing this project in 3-49 Example 3. Probability Exercise What is the probability of finishing this project in less than 53 days? D=53 p(t < D) t TE = 54

(Sum the variance along the critical path.) 3-50 (Sum the variance along the critical path.)

p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156) 3-51 p(t < D) t D=53 TE = 54 p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156) There is a 43.8% probability that this project will be completed in less than 53 weeks.

Ex 3. Additional Probability Exercise 3-52 Ex 3. Additional Probability Exercise What is the probability that the project duration will exceed 56 weeks? 30

Example 3. Additional Exercise Solution 3-53 Example 3. Additional Exercise Solution t TE = 54 p(t < D) D=56 p(Z > .312) = .378, or 37.8 % (1-NORMSDIST(.312)) 31

In construction, incentives for completing project early 3-54 Time-Cost Models In construction, incentives for completing project early In new product development, revenue stream starts earlier if project is launched earlier Time-Cost Models: To accelerate the completion of a project, expedite or “crash” the critical path project activity that has the cheapest cost per unit time to shorten its duration 32

Steps in Time-Cost Analysis 3-55 Steps in Time-Cost Analysis Using normal activity times, find the critical path Compute the crash cost per time period: Crash cost/period = (Crash cost - Normal cost)/ (Normal time - Crash time) If there is only one critical path, select the activity on the critical path that (a) can still be crashed, and (b) has the smallest crash cost per period If there are multiple critical paths, select the cheapest crash cost combination of critical path activities that can still be crashed that will reduce ALL critical paths by one period Update all activity times and repeat process if further reduction in critical path time is desired

3-56 Example 4. Great Valley Hospital Project with Crashing Act. NT CT NC CC CC/WK CP? A 2 1 22,000 22,750 750 Y B 3 1 30,000 34,000 2000 N C 2 1 26,000 27,000 1,000 Y D 4 3 48,000 49,000 1,000 N E 4 2 56,000 58,000 1,000 Y F 3 2 30,000 30,500 500 N G 5 2 80,000 84,500 1,500 Y H 2 1 16,000 19,000 3,000 Y

Start – B – D – G – H is also critical (14 wks) 3-57 Example 4. Great Valley Hospital Project Crashing Analysis Select the activity with smallest crash cost per week that is on the critical path – activity A at a cost of $750 Start – B – D – G – H is also critical (14 wks) Crash G by 1 week at a cost of $1,500 to reduce the project by an additional week (vs. crashing C and D at a combined cost of $2,000)

Answer: d. All of the above 3-58 Question Bowl Which of the following are examples of Graphic Project Charts? Gantt Bar Milestone All of the above None of the above Answer: d. All of the above 7

Answer: d. All of the above 3-59 Question Bowl Which of the following are one of the three organizational structures of projects? Pure Functional Matrix All of the above None of the above Answer: d. All of the above 7

Answer: a. SOW (or Statement of Work) 3-60 Question Bowl A project starts with a written description of the objectives to be achieved, with a brief statement of the work to be done and a proposed schedule all contained in which of the following? SOW WBS Early Start Schedule Late Start Schedule None of the above Answer: a. SOW (or Statement of Work) 7

3-61 Question Bowl For some activities in a project there may be some leeway from when an activity can start and when it must finish. What is this period of time called when using the Critical Path Method? Early start time Late start time Slack time All of the above None of the above Answer: c. Slack time 7

3-62 Question Bowl How much “slack time” is permitted in the “critical path” activity times? Only one unit of time per activity No slack time is permitted As much as the maximum activity time in the network As much as is necessary to add up to the total time of the project None of the above Answer: b. No slack time is permitted (All critical path activities must have zero slack time, otherwise they would not be critical to the project completion time.) 7

Subtracting slack time Adding project time None of the above 3-63 Question Bowl When looking at the Time-Cost Trade Offs in the Minimum-Cost Scheduling time-cost model, we seek to reduce the total time of a project by doing what to the least-cost activity choices? Crashing them Adding slack time Subtracting slack time Adding project time None of the above Answer: a. Crashing them (We “crash” the least-cost activity times to seek a reduced total time for the entire project and we do it step-wise as inexpensively as possible.) 7

3-64 End of Chapter 3