1. Managing Projects

2. Chapter Objectives Be able to:
Explain the difference between routine business activities and projects.
Describe the five major phases of a project.
Construct a Gantt chart and interpret the results.
Construct a project network diagram and calculate the earliest and latest start and finish times for all activities.
Identify the critical activities and paths in a network.
Crash a project.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

3. Project Management: Why Do It?
Building Mega Refineries in Record Time (India, 2006):
Demand for gasoline is increasing in USA
No new refineries in USA
Need to process heavy crude
Current capacity is not enough
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

4. Reliance Industries, Ltd:
Mobilized initial workforce of 20,000, will grow to 150,000 to complete project by December 2008
Built residential complex for 2500 families to attract skilled workers needed and an irrigated 2000-acre farm nearby
Expansion will add capacity of 582,000 barrels a day
Each welder will have six helpers to keep him supplied with necessary materials
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

5. What Is a Project?
A series of related tasks directed toward some major output or goal Often driven by a completion deadline
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

6. Project Phases I Concept Phase Project definition Phase
Broad definition and feasibility analysis
Budget estimates within  30%
Project definition Phase
Tentative schedules, budgets, organization
Budget estimates refined within  5% to 10%
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7. Project Phases II Planning phase Performance phase
Detailed tasks, timing, budgets and resources
Milestones
Project management tools
Performance phase
Execution and control
Postcompletion phase
“Wrap-up”
Reassignment of project resources
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8. Statement of Work (SOW)
A written description of the project objectives to be achieved, with
a brief statement of the work to be done
a proposed schedule specifying the start and completion dates
budget and completion steps (milestones)
written reports to be supplied.
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9. Breaking Down the Work Allows independent operation
Improves manageability
Decentralizes authority
Enables monitoring and measurement
Provides assessment of required resources
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

10. Work Breakdown Structure (WBS)
Level
1 Program
2 Project
3 Task (group or organization)
4 Subtask
5 Work Assignment
(organizational unit)
The work breakdown structure (WBDS) is the heart of project management. This subdivision of the objective into smaller and smaller pieces clearly defines the system and contributes to its understanding and success.
A task is a further subdivision of a project. It is usually not longer than several months in duration and is performed by one group or organization.
A subtask may be used if needed to further subdivide the project into more meaningful pieces.
A work package is a group of activities combined to be assignable to a single organizational unit. It still falls into the format of all project management—that the package provides a description of what is to be done, when it is to be started and completed, the budget, measures of performance, and specific events to be reached at points in time (called milestones). Typical milestones might be the completion of the design, the production of a prototype, the completed testing of the prototype, and the approval of a pilot run.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

11. Work Breakdown Structure Example
Level
1 Custom Home Builder
2 Custom Home
3 Foundation (group or organization)
4 Concrete work
5 Set-up forms
(organizational unit)
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

12. Tools for Project Control: Gantt Charts
Comment: Gantt chart formats in modern software programs for managing projects do show relationships in graphical form using interconnecting arrows.
...But there is no detailed information
about interrelationships
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

13. Tools for Project Control: Network Diagrams
Network techniques
Consider precedence relationships
Capture interdependency of activities
Determine critical path(s)
Sequence(s) of activities that determines overall duration of the project
Comment on the possibility that there may be more than one critical path, particularly in more complex project networks.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

14. Critical Path Method (CPM) Consider the following consulting project:
Activity
Designation
Immediate Predecessor(s)
Duration (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 4
Quality improvement pilot groups F
D, E 5
Write assessment report G
Develop a network diagram and determine the duration of the critical path(s) and slack times for all activities
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

15. This activity-on-node (AON) diagram shows the precedence relationships ...
. . .as well as the length of each activity.
Do you see the two paths through the network?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

16. Some Definitions Earliest Start Time (ES) Earliest Finish Time (EF)
= Latest EF for all immediate predecessors
Earliest Finish Time (EF)
= ES + activity’s duration
Latest Start Time (LS)
= LF – activity’s duration
Latest Finish Time (LF)
= Earliest LS for all immediate successors
Slack = amount of allowable delay in an activity
= Equal to LS – ES or LF – EF for an activity
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

17. Insights A ‘hit’ to a critical activity will make project late
Rational time estimates needed
Slack activities can start later
Difference between effort-driven and time-driven activities
Useful to have ‘Start’ and ‘Finish’ boxes on network diagram, particularly when there are two or more independent activities at the beginning and/or end of a project.
Effort-driven activities can be shortened by adding more resources
Time-driven activities (paint drying, concrete curing, etc.) very difficult to shorten without innovative alternatives.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

18. Some Assumptions
Project activities can be identified as entities. (There is a clear beginning and ending point for each activity.)
Project activity sequence relationships can be specified and networked
Project control should focus on the critical path (activities with no slack)
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

19. In First Example ...
Network-based scheduling techniques to:  Show precedence  Determine project duration  Identify critical paths and activities
Setting EF = LF for last activity implies that current length of project is OK
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

20. However, there are often ...
Deadlines for finishing projects
(Olympic stadium, dormitories, etc.)
Penalty or overhead costs if project is late
Competitive pressures
Competitors, slowing demand (Reliance Industries, Ltd.)
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

21. Ways to Shorten (Crash) a Project
BORROW resources from non-critical activities (ones with greatest slack)
Add MORE resources
Work MORE hours
Spend MORE $$$$
Consider why some time-driven activities cannot be crashed.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

22. Idea behind “CRASHING”
Duration of individual effort-driven activities can be shortened, but at a cost
Example: Following project must be completed by Week 26
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

23. Project Data Activity Duration Predecessors Crashable Weeks
Crash Cost/Week A 6
None B 11 4
$700 C 14 3
$2,000 D 2 E 1 F 5
$1,000 G H 7 I J K
F, G
$1,500 L
H, I
$2,500
Each step has a limit on how many weeks, hours, days, etc. that it can be crashed. The cost per week for doing this is considered to be a linear function.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

24. Network Diagram for Project
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

25. 1. Write Down All Possible Paths and Lengths of Time for Each
Path Length
ABEJ 25
ABFK 26
ACGK 30
ACHL 30
ADIL 14
Path lengths are sum of activity durations along the chosen path from project start to project finish without consideration for effects of other paths intersecting the chosen path.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

26. 2. Identify All Paths to be Shortened
Path Length
ABEJ 25
ABFK 26
ACGK 30 Critical Path
ACHL 30 Critical Path
ADIL 14
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

27. 3. Find Lowest-Cost Way to Shorten Critical Path(s)
Path Length
ABEJ 25
ABFK 26
ACGK 30
ACHL 30
ADIL 14
To CRASH, either:
1. Shorten C or
2. Shorten {G or K} and {H or L}
Shorten C by 3 weeks
Cost = 3×$2,000 = $6,000
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

28. Update Lengths in Table
Path Length
ABEJ 25
ABFK 26
ACGK 3027
ACHL 3027
ADIL 14
Are we done?
What are our
next cheapest
alternatives?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

29. To Crash Further 1. Shorten C some more, or
2. Shorten {G or K} and {H or L}
Shorten Both G and H by 1 Week:
Cost = $1,000 + $2,000 = $3,000
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

30. Update Lengths in Table
Path Length
ABEJ 25
ABFK 26
ACGK 302726
ACHL 302726
ADIL 14
Total Cost to Crash = $6, $3,000
= $9,000
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

31. If the reduction in overhead per week is $4000
How many more weeks should the company try to crash the project?

32. Observations
Cost of crashing becomes more and more expensive as cheapest options are used up
There is a limit to how far a project can be crashed.
Crashing non-critical activities is pointless
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

33. Controlling Projects CPM used primarily to Plan and Schedule, BUT ...
Things rarely go as planned
The need for additional activities arises
Better time and resource estimates are made as project progresses  use of PERT (Program evaluation and review technique) where probabilistic time estimates are used
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

34. Computer-Based Package Advantages
Regular updates
Change analysis, tracking, and exception reports
High level of detail
Scheduling around resource constraints
Text examples using Microsoft Project™ on pages
Discussion of resource constraints: available working hours, vacations, illnesses, jury duty, overtime limitations, money….
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

35. Project Management Institute (PMI) www.pmi.org
Sponsors education and certification
Sponsors conferences, research, user groups
Publishes Guide to the Project Management Body of Knowledge (PMBOK®)
PMBOK®
Part I: Various business processes for projects
Part II: Nine project knowledge areas
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

36. Managing Projects Case Study
Viva Roma!