1. Beni Asllani University of Tennessee at Chattanooga
Chapter 9
Project Management
Operations Management - 5th Edition
Roberta Russell & Bernard W. Taylor, III
Beni Asllani University of Tennessee at Chattanooga
Copyright 2006 John Wiley & Sons, Inc.

2. Lecture Outline Project Planning Project Scheduling Project Control
CPM/PERT
Probabilistic Activity Times
Project Crashing and Time-Cost Trade-off
Copyright 2006 John Wiley & Sons, Inc.

3. What is a Project? Project Examples
unique, one-time operational activity or effort
Examples
constructing houses, factories, shopping malls, athletic stadiums or arenas
developing military weapons systems, aircrafts, new ships
launching satellite systems
constructing oil pipelines
developing and implementing new computer systems
planning concert, football games, or basketball tournaments
introducing new products into market
Copyright 2006 John Wiley & Sons, Inc.

4. Project Elements Objective Scope Contract requirements Schedules
Resources
Personnel
Control
Risk and problem analysis
Copyright 2006 John Wiley & Sons, Inc.

5. Project Management Process
Project planning
Project scheduling
Project control
Project team
made up of individuals from various areas and departments within a company
Matrix organization
a team structure with members from functional areas, depending on skills required
Project Manager
most important member of project team
Copyright 2006 John Wiley & Sons, Inc.

6. Project Scope Scope statement Statement of work
a document that provides an understanding, justification, and expected result of a project
Statement of work
written description of objectives of a project
Work breakdown structure
breaks down a project into components, subcomponents, activities, and tasks
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7. Work Breakdown Structure for Computer Order Processing System Project
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8. Organizational Breakdown Structure
a chart that shows which organizational units are responsible for work items
Responsibility Assignment Matrix
shows who is responsible for work in a project
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9. Project Scheduling Steps Techniques Define activities
Sequence activities
Estimate time
Develop schedule
Techniques
Gantt chart
CPM
PERT
Microsoft Project
Copyright 2006 John Wiley & Sons, Inc.

10. Gantt Chart
Graph or bar chart with a bar for each project activity that shows passage of time
Provides visual display of project schedule
Slack
amount of time an activity can be delayed without delaying the project
Copyright 2006 John Wiley & Sons, Inc.

11. Example of Gantt Chart Month 0 2 4 6 8 10 | | | | | 1 3 5 7 9
| | | | |
Activity
Design house and obtain financing
Lay foundation
Order and receive materials
Build house
Select paint
Select carpet
Finish work
Month
Copyright 2006 John Wiley & Sons, Inc.

12. Project Control Time management Cost management Quality management
Performance management
Earned Value Analysis
a standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and measuring schedule and budget variation
Communication
Enterprise project management
Copyright 2006 John Wiley & Sons, Inc.

13. CPM/PERT Critical Path Method (CPM)
DuPont & Remington-Rand (1956)
Deterministic task times
Activity-on-node network construction
Project Evaluation and Review Technique (PERT)
US Navy, Booz, Allen & Hamilton
Multiple task time estimates
Activity-on-arrow network construction
Copyright 2006 John Wiley & Sons, Inc.

14. Project Network Activity-on-node (AON) Node Activity-on-arrow (AOA)
nodes represent activities, and arrows show precedence relationships
Activity-on-arrow (AOA)
arrows represent activities and nodes are events for points in time
Event
completion or beginning of an activity in a project 1 3 2
Branch
Node
Copyright 2006 John Wiley & Sons, Inc.

15. AOA Project Network for a House3 2 1 4 6 7 5
Lay foundation
Design house and obtain financing
Order and receive materials
Dummy
Finish work
Select carpet
Select paint
Build house
Copyright 2006 John Wiley & Sons, Inc.

16. Concurrent Activities2 3
Lay foundation
Order material
(a) Incorrect precedence relationship
(b) Correct precedence relationship 4
Dummy
Lay
foundation 1
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17. AON Network for House Building Project1 3 2 4 5 6 7
Start
Design house and obtain financing
Order and receive materials
Select paint
Select carpet
Lay foundations
Build house
Finish work
Copyright 2006 John Wiley & Sons, Inc.

18. Critical Path Critical path 4 2 7 1 Start 3 6 5
A: = 9 months
B: = 8 months
C: = 8 months
D: = 7 months
Critical path
Longest path through a network
Minimum project completion time
Copyright 2006 John Wiley & Sons, Inc.

19. Activity Start Times 4 2 7 1 3 6 5 Start at 5 months
Finish at 9 months
Finish
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20. Mode Configuration 1 3 Activity number Earliest start Earliest finish3
Latest finish
Activity duration
Latest start
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21. Forward Pass
Start at the beginning of CPM/PERT network to determine the earliest activity times
Earliest Start Time (ES)
earliest time an activity can start
ES = maximum EF of immediate predecessors
Earliest finish time (EF)
earliest time an activity can finish
earliest start time plus activity time
EF= ES + t
Copyright 2006 John Wiley & Sons, Inc.

22. Earliest Activity Start and Finish Times1 3 2 5 4 6 8 7 9
Start
Design house and obtain financing
Select pain
Lay foundations
Select carpet
Build house
Finish work
Order and receive materials
Copyright 2006 John Wiley & Sons, Inc.

23. Backward Pass
Determines latest activity times by starting at the end of CPM/PERT network and working forward
Latest Start Time (LS)
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
LS = minimum LS of immediate predecessors
Copyright 2006 John Wiley & Sons, Inc.

24. Latest Activity Start and Finish Times1 3 2 5 4 6 7 8 9
Start
Design house and obtain financing
Select pain
Lay foundations
Select carpet
Build house
Finish work
Order and receive materials
Copyright 2006 John Wiley & Sons, Inc.

25. Activity Slack Slack S EF LF ES LS Activity * Critical Path 9 8 *7 1 79 8 *7 1 7 6 5 *4 4 3 *2 *1
Slack S EF LF ES LS
Activity
Copyright 2006 John Wiley & Sons, Inc.

26. Probabilistic Time Estimates
Beta distribution
a 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 =
b - a 2
Copyright 2006 John Wiley & Sons, Inc.

27. Examples of Beta Distributions
P(time)
Time a m t b
m = t
Copyright 2006 John Wiley & Sons, Inc.

28. Project Network with Probabilistic Time Estimates: Example
Start
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
Copyright 2006 John Wiley & Sons, Inc.

29. Activity Time Estimates
TIME ESTIMATES (WKS) MEAN TIME VARIANCE
ACTIVITY a m b t б2
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30. Activity Early, Late Times, and Slack
ACTIVITY t б ES EF LS LF S
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31. Earliest, Latest, and Slack
Start
Finish 1 8 9 3 2 5 4 13 16 21 6 7 14 12 10 17
Critical Path 2 6 5 9 3 8 16 7 11 25
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32. Total project variance
2 = б22 + б52 + б82 + б112 =
= 6.89 weeks
Total project variance
Copyright 2006 John Wiley & Sons, Inc.

33. 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 x is from mean
Z =
x -  
Copyright 2006 John Wiley & Sons, Inc.

34. Normal Distribution Of Project Time
 = tp
Time x Z
Probability
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35. Southern Textile Example
What is the probability that the project is completed within 30 weeks?
 = 25
Time (weeks)
x = 30
P(x  30 weeks)
 2 = 6.89 weeks
 =
 = 2.62 weeks
Z = =
= 1.91
x -  
2.62
From Table A.1, (appendix A) a Z score of 1.91 corresponds to a probability of Thus P(30) = =
Copyright 2006 John Wiley & Sons, Inc.

36. Southern Textile Example
What is the probability that the project is completed within 22 weeks?
 = 25
Time (weeks)
x = 22
P(x  22 weeks)
 2 = 6.89 weeks
 =
 = 2.62 weeks
Z = =
= -1.14
x -  
2.62
From Table A.1 (appendix A) a Z score of corresponds to a probability of Thus P(22) = =
Copyright 2006 John Wiley & Sons, Inc.

37. Project Crashing Crashing Crash time Crash cost Goal
reducing project time by expending additional resources
Crash time
an amount of time an activity is reduced
Crash cost
cost of reducing activity time
Goal
reduce project duration at minimum cost
Copyright 2006 John Wiley & Sons, Inc.

38. Project Crashing: Example1 12 2 8 4 3 5 6 7
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39. Project Crashing: Example (cont.)
$7,000 –
$6,000 –
$5,000 –
$4,000 –
$3,000 –
$2,000 –
$1,000 – –
| | | | | | |
Weeks
Normal activity
Normal time
Normal cost
Crash time
Crashed activity
Crash cost
Slope = crash cost per week
Copyright 2006 John Wiley & Sons, Inc.

40. Normal Activity and Crash Data
TOTAL
NORMAL CRASH ALLOWABLE CRASH
TIME TIME NORMAL CRASH CRASH TIME COST PER
ACTIVITY (WEEKS) (WEEKS) COST COST (WEEKS) WEEK
$3,000 $5,000 5 $400
,000 3,
,000 7, ,000
,000 71, ,000 , ,
,000 22, ,000
$75,000 $110,700
Copyright 2006 John Wiley & Sons, Inc.

41. FROM … TO… Project Duration: 36 weeks Project Duration: 31 weeks12 2 8 3 4 5 6 7
$400
$500
$3000
$7000
$200
$700
Project Duration:
36 weeks
FROM … 1 7 2 8 3 4 5 6
$400
$500
$3000
$7000
$200
$700 12
Project Duration:
31 weeks
Additional Cost:
$2000
TO…
Copyright 2006 John Wiley & Sons, Inc.

42. Time-Cost Relationship
Crashing costs increase as project duration decreases
Indirect costs increase as project duration increases
Reduce project length as long as crashing costs are less than indirect costs
Copyright 2006 John Wiley & Sons, Inc.

43. Minimum cost = optimal project time
Time-Cost Tradeoff
Cost ($)
Project duration
Crashing Time
Minimum cost = optimal project time
Total project cost
Indirect cost
Direct cost
Copyright 2006 John Wiley & Sons, Inc.

44. Copyright 2006 John Wiley & Sons, Inc. All rights reserved
Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.
Copyright 2006 John Wiley & Sons, Inc.