1. Project Planning and Budgeting

2. Recall the four stages Project Definition and Conceptualization
Project Planning and Budgeting
Project Execution and Control
Project Termination and Closeout

3. Elements Of Project Management
Project team
individuals from different departments within company
Matrix organization
team structure with members from different functional areas depending on skills needed
Project manager
leader of project team Ch

4. Project Planning Statement of work
written description of goals, work & time frame of project
Activities require labor, resources & time
Precedence relationship shows sequential relationship of project activities Ch

5. WORK BREAKDOWN 1

6. WORK BREAKDOWN 2

7. GANTT CHART

8. Simplified Project Network
Construct forms
Pour concrete 1 2 3
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

9. PERT CHART 1

10. PERT CHART 2

11. Elements Of Project Planning
Define project objective(s)
Identify activities
Establish precedence relationships
Make time estimates
Determine project completion time
Compare project schedule objectives
Determine resource requirements to meet objective Ch

12. Work breakdown structure (WBS)
determine subcomponents, activities & tasks
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

13. Russell/Taylor Oper Mgt 3/e
Gantt Chart
Popular tool for project scheduling
Graph with bar for representing the time for each task
Provides visual display of project schedule
Also shows slack for activities
(amount of time activity can be delayed without delaying project)
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

14. A Gantt Chart Month 2 4 6 8 10 1 3 5 7 9 Month Activity2 4 6 8 10     
Activity
Design house and
obtain financing
Lay foundation
Order and receive
materials
Build house
Select paint
Select carpet
Finish work  1  3  5  7  9
Month Ch

15. CPM/PERT Critical Path Method (CPM)
DuPont & Remington-Rand (1956)
deterministic task times
activity-on-node network construction
Project Eval. & Review Technique (PERT)
US Navy, Booz, Allen & Hamilton
multiple task time estimates
activity-on-arrow network construction Ch

16. The Project Network Network consists of branches & nodes Node 1 2 3

17. Network Construction
In AON, nodes represent activities & arrows show precedence relationships
In AOA, arrows represent activities & nodes are events for points in time
An event is the completion or beginning of an activity
A dummy shows precedence for two activities with same start & end nodes Ch

18. Project Network For A House3
Dummy
Lay foundation 2
Build house
Finish work 3 1 1 2 4 6 7 3 1
Design house and obtain financing
Order and receive materials 1
Select paint 1
Select carpet 5
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

19. Critical Path
A path is a sequence of connected activities running from start to end node in network
The critical path is the path with the longest duration in the network
Project cannot be completed in less than the time of the critical path Ch

20. All Possible Paths 3 + 1 + 3 + 1 = 8 months
= 9 months; the critical path B:
= 8 months C:
= 8 months D:
= 7 months Ch

21. Concurrent Activities3 2 3
Lay foundation
Order material
Lay
foundation
Dummy 2 4
Order material
Incorrect
precedence
relationship
Correct
precedence
relationship
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

22. Early Times (Housebuilding example)
ES - earliest time activity can start
Forward pass starts at beginning of CPM/PERT network to determine ES times
EF = ES + activity time
ESij = maximum (EFi)
EFij = ESij + tij
ES12 = 0
EF12 = ES12 + t12 = = 3 months
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

23. Russell/Taylor Oper Mgt 3/e
Computing Early Times
ES23 = max (EF2) = 3 months
ES46 = max (EF4) = max (5,4) = 5 months
EF46 = ES46 + t46 = = 8 months
EF67 =9 months, the project duration
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

24. Russell/Taylor Oper Mgt 3/e
Late Times
LS - latest time activity can start & not delay project
Backward pass starts at end of CPM/PERT network to determine LS times
LF = LS + activity time
LSij = LFij - tij
LFij = minimum (LSj)
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

25. Russell/Taylor Oper Mgt 3/e
Computing Late Times
LF67 = 9 months
LS67 = LF67 - t67 = = 8 months
LF56 = minimum (LS6) = 8 months
LS56 = LF56 - t56 = = 7 months
LF24 = minimum (LS4) = min(5, 6) = 5 months
LS24 = LF24 - t24 = = 4 months
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

26. Russell/Taylor Oper Mgt 3/e
Early And Late Times
( )
ES=5, EF=5
LS=5, LF=5
( )
ES=3, EF=5
LS=3, LF=5 3
( )
ES=8, EF=9
LS=8, LF=9
( )
ES=5, EF=8
LS=5, LF=8 2 3 1 1 2 4 6 7
( )
ES=3, EF=4
LS=4, LF=5 3 1
( )
ES=0, EF=3
LS=0, LF=3 1 1
( )
ES=6, EF=7
LS=7, LF=8
( )
ES=5, EF=6
LS=6, LF=7 5
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

27. Russell/Taylor Oper Mgt 3/e
Activity Slack
Activities on critical path have ES=LS & EF=LF
Activities not on critical path have slack
Sij = LSij - ESij
Sij = LFij - EFij
S24 = LS24 - ES24 = = 1 month
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

28. Russell/Taylor Oper Mgt 3/e
Activity Slack Data
Activity LS ES LF EF Slack (S)
1-2*
3-4*
4-6*
6-7*
* Critical path
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

29. Probabilistic Time Estimates
Reflect uncertainty of activity times
Beta distribution is used in PERT
Mean (expected time):
a + 4m + b 6
t = 2
b - a 6
( )
Variance: 2 =
Where,
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

30. Example Beta Distributions
P (time)
P (time) b a m t b
P (time) a b
m = t
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

31. Russell/Taylor Oper Mgt 3/e
PERT Example
Equipment testing and modification 2 6
Final debugging
Equipment installation
Dummy
System Training 1 3 5 7 9
System development
Manual Testing
System changeover
System Testing
Job training
Dummy
Position recruiting
Orientation 4 8
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

32. Russell/Taylor Oper Mgt 3/e
Activity Information
Time estimates (wks) Mean Time Variance
Activity a b c t 2
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

33. Russell/Taylor Oper Mgt 3/e
Early And Late Times
Activity t 2 ES EF LS LF S
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

34. Russell/Taylor Oper Mgt 3/e
Network With Times
( )
ES=8, EF=13
LS=16 LF=21 2 6
( )
ES=0, EF=8
LS=1, LF=9 5
( )
ES=13, EF=25
LS=16 LF=25
( )
ES=8, EF=8
LS=9, LF=9 8 4
( )
ES=0, EF=6
LS=0, LF=6
( )
ES=9, EF=13
LS=9, LF=16 3 9 1 3 5 7 9 6
( )
ES=6, EF=9
LS=6, LF=9 7
( )
ES=13, EF=25
LS=16 LF=25
( )
ES=9, EF=13
LS=12, LF=16
( )
ES=0, EF=3
LS=2, LF=5 4
( )
ES=13, EF=13
LS=16 LF=16 3
( )
ES=3, EF=7
LS=5, LF=9 4 2 4 8
( )
ES=3, EF=5
LS=14, LF=16
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

35. Russell/Taylor Oper Mgt 3/e
Project Variance
Project variance is the sum of variances on the critical path
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

36. 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 -  
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

37. Normal Distribution Of Project Time
Probability Z
 = tp x
Time
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

38. Probabilistic Analysis Example
What is the probability that the project is completed within 30 weeks?
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

39. Determining Probability From Z Value… . . . .
P( x<= 30 weeks) =
 = 25
x = 30
Time (weeks)
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

40. Russell/Taylor Oper Mgt 3/e
What is the probability that the project is completed within 22 weeks?
P( x<= 22 weeks) =0.1271
x = 22
 = 25
Time (weeks)
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

41. Russell/Taylor Oper Mgt 3/e
Project Crashing
Crashing is reducing project time by expending additional resources
Crash time is an amount of time an activity is reduced
Crash cost is the cost of reducing the activity time
Goal is to reduce project duration at minimum cost
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

42. House-building Network
Activity times in weeks 3 8 12 4 1 2 4 6 7 12 4 4 4 5
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

43. Normal Activity And Crash Data
Total
Normal Crash Allowable Crash
Time Time Normal Crash Crash Time Cost per
Activity (wks) (wks) Cost Cost (wks) Week
$3,000 $5,000 5 $400
,000 3,
,000 7, ,000 ,
,000 71, ,000 ,
,000 22, ,000
$75,000 $110,700
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

44. Network With Crashing Costs
Activity 1-2 can be crashed a total of 5 weeks for $2000
Crash cost per week = Total crash cost/Total crash time
= $2,000/5 = $400 per week 3
$500 8
$7,000 12 4
$7,000 1 2 4 6 7
$400
$3,000 12 4 4 4
$200
$200 5
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

45. Normal And Crash Relationships$ 12 4 2 6 8 10 14
1,000
3,000
4,000
5,000
7,000
2,000
6,000
Crash cost
Crashed activity
Slope = crash cost per week
Normal cost
Normal activity
Crash time
Normal time
Weeks
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

46. Russell/Taylor Oper Mgt 3/e
Crashing Solution
Normal Crash Crash Crash Crashing
Time Time Time Cost per Cost
Activity (wks) (wks) Used Week Incurred
$400 $2,000
,500
,000 0
,000 21,000
,000 7,000
12 $31,500
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

47. Russell/Taylor Oper Mgt 3/e
Crashed Project 3 1 2 4 6 7 4 4 5
Original time Crashed times
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

48. 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
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch

49. Russell/Taylor Oper Mgt 3/e
Time-Cost Tradeoff
Minimum cost = optimal project time
Total cost
Cost ($)
Indirect cost
Direct cost
Crashing
Time
Project Duration
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch