1. Stevenson 17
Project Management

2. Learning Objectives
Discuss the behavioral aspects of projects in terms of project personnel and the project manager.
Discuss the nature and importance of a work breakdown structure in project management.
Give a general description of PERT/CPM techniques.
Construct simple network diagrams.

3. Learning Objectives
List the kinds of information that a PERT or CPM analysis can provide.
Activity Scheduling
Analyze networks with deterministic times.
Analyze networks with probabilistic times.
Describe activity “crashing.

4. Projects
Build A
A Done
Build B
B Done
Build C
C Done
Build D
Ship
JAN
FEB
MAR
APR
MAY
JUN
On time!
Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame.

5. Project Management How is it different? Why is it used?
Limited time frame
Narrow focus, specific objectives
Less bureaucratic
Why is it used?
Special needs
Pressures for new or improves products or services

6. Project Management What are the Key Metrics
Time
Cost
Performance objectives
What are the Key Success Factors?
Top-down commitment
Having a capable project manager
Having time to plan
Careful tracking and control
Good communications

7. Project Management What are the Major Administrative Issues?
Executive responsibilities
Project selection
Project manager selection
Organizational structure
Organizational alternatives
Manage within functional unit
Assign a coordinator
Use a matrix organization with a project leader

8. Key Decisions Deciding which projects to implement
Selecting a project manager
Selecting a project team
Planning and designing the project
Managing and controlling project resources
Deciding if and when a project should be terminated

9. Project Manager Responsible for: Work Quality Human Resources Time
Communications Costs

10. Project Life Cycle

11. Project Management What are the tools? Gantt charts
Work breakdown structure
Network diagram
Risk management

12. Gantt Chart
A popular tool for planning and scheduling simple projects, and for initial planning for more complex projects
Graph or bar chart
Bars represent the time for each task
Bars also indicate status of tasks
Provides visual display of project schedule
Closely associated with PERT
Slack
amount of time an activity can be delayed without delaying the project

14. Planning and Scheduling
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Locate new facilities
Interview staff
Hire and train staff
Select and order furniture
Remodel and install phones
Move in/startup
Gantt Chart

15. Precedence Relationship
Activity
Activity Legend
Activity Predecessor
Activity Duration
Design house and obtain financing 1 - 3
Lay foundation 2
Order and receive material
Build house 4
2,3
Select Paint 5
Select Carpet 6
Finish work 7
4,6

16. Example of Gantt Chart Month 0 2 4 6 8 10 | | | | | 1 3 5 7 9 Activity
| | | | |
Activity
Design house and obtain financing
Lay foundation
Order and receive materials
Build house
Select paint
Select carpet
Finish work
Month

17. Work Breakdown Structure
Project X
Level 1
Level 2
Level 3
Level 4

18. Work Breakdown Structure

19. PERT and CPM PERT: Program Evaluation and Review Technique
CPM: Critical Path Method
Graphically displays project activities
Estimates how long the project will take
Indicates most critical activities
Show where delays will not affect project

20. The Network Diagram
Network (precedence) diagram – diagram of project activities that shows sequential relationships by the use of arrows and nodes.
Activity-on-arrow (AOA) – a network diagram convention in which arrows designate activities.
Activity-on-node (AON) – a network diagram convention in which nodes designate activities.
Activities – steps in the project that consume resources and/or time.
Events – the starting and finishing of activities, designated by nodes in the AOA convention.

21. The 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 path; the difference the length of path and the length of critical path

22. Project Network – Activity on Arrow1 2 3 4 5 6
Locate facilities
Order furniture
Furniture setup
Interview
Hire and train
Remodel
Move in
AOA

23. Project Network – Activity on Node1 2 3 5 6
Locate facilities
Order furniture
Furniture setup
Interview
Remodel
Move in 4
Hire and train 7 S
AON

24. Example of Gantt Chart Month 0 2 4 6 8 10 | | | | | 1 3 5 7 9 Activity
| | | | |
Activity
Design house and obtain financing
Lay foundation
Order and receive materials
Build house
Select paint
Select carpet
Finish work
Month

25. AON Network for House Building Project1 3 2 4 5 6 7
Start
Design house and obtain financing
Order &receive materials
Select paint
Select carpet
Lay foundation
Build house
Finish work
Activity Number
Activity Time

26. Critical Path Critical path 1 3 2 4 5 6 7 Start
Activity Network (Scheduling) Diagrams are used to determine Critical Path. 1 3 2 4 5 6 7
Start
A: = 9 months
B: = 8 months
C: = 8 months
D: = 7 months
Critical path
Longest path through a network
Minimum project completion time

27. Activity Start Times 1 3 2 4 5 6 7
Start
Starts at 3 months
Starts at 6 months
Starts at 5 months
Starts at 8 months
Finishes at 9 months
Finish
Starts at 0 month
Why does Activity six start at 6 months? Because Activity 5 must be completed before activity 6, and activity 2 must be completed before activity 5.

28. Node Configuration 1 3 Activity duration Activity number3
Activity duration
Activity number
Earliest start (ES)
Latest start (LS)
Latest finish (LF)
Earliest finish (EF)

29. Activity Scheduling Earliest start time (ES) Forward pass
earliest time an activity can start
ES = maximum EF of immediate predecessors
Forward pass
starts at beginning of CPM/PERT network to determine earliest activity times
Earliest finish time (EF)
earliest time an activity can finish
earliest start time plus activity duration
EF= ES + t

30. Activity Scheduling

31. Earliest Activity Start and Finish Times
Lay foundation
Build house 2 3 5 4 5 8 2
Finish work 3 1 3 7 8 9
Start 3 1
Design house and obtain financing 6 6 7 3 3 4 1 1 5 5 6
Select carpet 1
Order and receive materials
Select paint

32. Activity Scheduling Latest start time (LS) Latest finish time (LF)
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
LF = minimum LS of immediate predecessors
Backward pass
Determines latest activity times by starting at the end of CPM/PERT network and working forward

33. Latest Activity Start and Finish Times
Lay foundation
Build house 2 3 5 4 5 8 2 3 5
Finish work 3 5 8 1 3 7 8 9
Start 3 3 1 8 9
Design house and obtain financing 6 6 7 3 3 4 1 7 8 1 4 5 5 5 6
Select carpet 1 6 7
Order and receive materials
Select paint
Question: Why is Activity 3’s LF 5?

34. Activity Slack Slack = LS – ES Slack = LF – EF
* Critical Path 9 8 *7 1 7 6 5 *4 4 3 *2 *1
Slack EF LF ES LS
Activity
Slack = LS – ES or
Slack = LF – EF
Critical Path Items contain zero slack

35. Time Estimates Deterministic Probabilistic
Time estimates that are fairly certain
Probabilistic
Estimates of times that allow for variation

36. Example 1 1 2 3 4 5 6 Deterministic time estimates 6 weeks
Locate facilities
Order furniture
Furniture setup
Interview
Hire and train
Remodel
Move in
Deterministic
time estimates

37. Example 1 Solution: Deterministic
Critical Path

38. Probabilistic Time Estimates
Optimistic time
Time required under optimal conditions
Pessimistic time
Time required under worst conditions
Most likely time
Most probable length of time that will be required

39. Expected Time te = to + 4tm +tp 6 te = expected time (“t” in example)
to = optimistic time (“a” in example)
tm = most likely time (“m” in example)
tp = pessimistic time (“b” in example)

40. Variance (tp – to)2 2 = 36 2 = variance to = optimistic time
2 =
(tp – to)2 36
2 = variance
to = optimistic time
tp = pessimistic time

41. Probabilistic Time Estimates
Beta distribution
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 = 2
b - a

42. Project with Probabilistic Time Estimates
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
Start
Activity
a, m, b

43. Activity Time Estimates
TIME ESTIMATES (WKS) MEAN TIME VARIANCE
ACTIVITY a m b t б2

44. Activity Early, Late Times & Slack

45. Earliest, Latest, and Slack
Critical Path ; Project Duration = = 25

46. Total Project Variance
2 = б22 + б52 + б82 + б112
2 =
= 6.89 weeks
Key point to remember – to calculate project variance, we need to add the variances of each activities on the critical path.

47. 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 that x is from the mean
Z =
x -  

48. Normal Distribution of Project Time
 = tp
Time x Z
Probability

49. Previous Example
What is probability that project is completed within 30 weeks?
 2 = 6.89 weeks
 =
 = 2.62 weeks
Z = =
= 1.91
x -  
2.62
From Table of Area under Normal Curve (appendix B, table A) a Z score of 1.91 corresponds to a probability of Thus P(x≤30) = =
 = 25
Time (weeks)
x = 30
P(x  30 weeks)
Length of Critical Path

50. Same Example
What is probability that project is completed within 22 weeks?
 2 = 6.89 weeks
 =
 = 2.62 weeks
Z = =
= -1.14
x -  
2.62
From Table of Area under Normal Curve (appendix B, table A) a Z score of corresponds to a probability of
 = 25
Time (weeks)
x = 22
P(x  22 weeks) =
0.3729

51. Time-cost Trade-offs: Crashing
Crash – shortening activity duration
Procedure for crashing
Crash the project one period at a time
Only an activity on the critical path
Crash the least expensive activity
Multiple critical paths: find the sum of crashing the least expensive activity on each critical path

52. Time-Cost Trade-Offs: Crashing

53. Project Crashing Example
Project costs are $1000/day 6 a 4 d 5 c 10 b 9 e 2 f

54. Project Crashing Solution
Find the critical path:
Rank the critical path activities in order of lowest crashing cost, and determine the number of days that can be crashed
Normal time – crash time

55. Project Crashing Solution
Crash the project, one day at a time. After each crash, re-check the critical path.
Crash activity c one day for $300. Length of critical path in now 19 days.
Activity c cannot be crashed any more (only had 1 day available for crashing).
Crash activity e one day for $600. Length of critical path is now 18 days – same as path a-b-f.
Both paths are now critical. We must shorten both paths for further improvement

56. Project Crashing Solution
Remaining activities for crashing and costs:
Analysis:
Should we crash f? f is on both paths, and crashing cost is $800 per day.
Alternatively, we may crash b ($500/day) and e ($600/day) to reduce 1 day. But the combined cost is $1100.

57. Project Crashing Solution
Crash f. Project duration is now 17 days.
Analysis: can we crash any more activities? Cost is crash b is $500 and cost to crash e is $600, added together ($1100) exceeds the project daily cost of $1000.
Conclusion: no more crashing is feasible.
Summary:

58. Advantages of PERT Forces managers to organize
Provides graphic display of activities
Identifies
Critical activities
Slack activities 1 2 3 4 5 6

59. Limitations of PERT Important activities may be omitted
Precedence relationships may not be correct
Estimates may include a fudge factor
May focus solely on critical path 1 2 3 4 5 6
142 weeks

60. Project Management Software
Computer aided design (CAD)
Groupware (Lotus Notes)
CA Super Project
Harvard Total Manager
MS Project
Sure Track Project Manager
Time Line

61. Project Risk Management
Risk: occurrence of events that have undesirable consequences
Delays
Increased costs
Inability to meet specifications
Project termination

62. Risk Management Identify potential risks Analyze and assess risks
Work to minimize occurrence of risk
Establish contingency plans

63. Summary Projects are a unique set of activities
Projects go through life cycles
PERT and CPM are two common techniques
Network diagrams
Project management software available

64. QUIZ ON PROJECT MANAGEMENT
NEXT SESSION:
QUIZ ON PROJECT MANAGEMENT
(Closed book)
(Bring an equation sheet – must conform to policy)