1. © The McGraw-Hill Companies, Inc., 2004 1 Chapter 3 Project Management

2. © The McGraw-Hill Companies, Inc., 2004 2 Definition of Project Management Project Control Charts Structuring Projects Work Breakdown Structure Critical Path Scheduling —CPM with a Single Time —CPM with Three Time Estimates OBJECTIVES

3. © The McGraw-Hill Companies, Inc., 2004 3 Project Management Defined Project —A series of related jobs usually directed toward some major output and requiring a significant period of time to perform Project Management —The management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project

4. © The McGraw-Hill Companies, Inc., 2004 4 Project Management Project are usually: —Infrequent —Exact duration is difficult to estimate —Control may be difficult because of: Makeup of the project team Expert among experts

5. © The McGraw-Hill Companies, Inc., 2004 5 Structuring Projects: Pure Project Defined A pure project is where a self-contained team works full-time on the project

6. © The McGraw-Hill Companies, Inc., 2004 6 Structuring Projects Pure Project: Advantages The project manager has full authority over the project Team members report to one boss Shortened communication lines Team pride, motivation, and commitment are high

7. © The McGraw-Hill Companies, Inc., 2004 7 Structuring Projects: Pure Project Disadvantages Duplication of resources —Equipment and people not shared across projects Organizational goals and policies are ignored —Team members detached from headquarters Lack of technology transfer —Due to weakened functional division Team members have no functional area "home“ —Project termination often delayed as members worry about life after the project

8. © The McGraw-Hill Companies, Inc., 2004 8 Structuring Projects: Functional Projects Defined President Research and Development EngineeringManufacturing Project A Project B Project C Project D Project E Project F Project G Project H Project I A functional project is housed within a functional division Example, Project “B” is in the functional area of Research and Development.

9. © The McGraw-Hill Companies, Inc., 2004 9 Structuring Projects: Functional Project Advantages A team member can work on several projects Technical expertise is maintained within the functional area The functional area is a “home” after the project is completed Critical mass of specialized knowledge

10. © The McGraw-Hill Companies, Inc., 2004 10 Structuring Projects: Functional Project Disadvantages Aspects of the project that are not directly related to the functional area get short-changed Motivation of team members is often weak Needs of the client are secondary and are responded to slowly

11. © The McGraw-Hill Companies, Inc., 2004 11 Structuring Projects: Matrix Project Organization Structure President Research and Development Engineering Manufacturing Marketing Manager Project A Manager Project B Manager Project C

12. © The McGraw-Hill Companies, Inc., 2004 12 Structuring Projects: Matrix Project Advantages Enhanced communications between functional areas Pinpointed responsibility Duplication of resources is minimized Functional “home” for team members Policies of the parent organization are followed

13. © The McGraw-Hill Companies, Inc., 2004 13 Structuring Projects: Matrix Projects Disadvantages Too many bosses —Functional manager often listened to first because of direct influence on promotions and raises Depends on project manager’s negotiating skills Potential for sub-optimization —PM’s could hoard resources for own projects —Other projects could be harmed

14. © The McGraw-Hill Companies, Inc., 2004 14 Phases of Project Management Planning —Work breakdown structure —Feasibility study —Precedence determination Scheduling —Construct the chart and apply times —Identify priorities Execution and control —Review and modify the project

15. © The McGraw-Hill Companies, Inc., 2004 15 Work Breakdown Structure Defined Program Project 1Project 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 A work breakdown structure defines the hierarchy of project tasks, subtasks, and work packages

16. © The McGraw-Hill Companies, Inc., 2004 16 Work Breakdown Structure Allows the elements to be worked on independently Make them manageable in size Give authority to carry out the program Monitor and measure the program Provide the required resources

17. © The McGraw-Hill Companies, Inc., 2004 17 Project Control Charts: Gantt Chart Activity 1 Activity 2 Activity 3 Activity 4 Activity 5 Activity 6 Time Vertical Axis: Always Activities or Jobs Horizontal Axis: Always Time Horizontal bars used to denote length of time for each activity or job.

18. © The McGraw-Hill Companies, Inc., 2004 18 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

19. © The McGraw-Hill Companies, Inc., 2004 19 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.

20. © The McGraw-Hill Companies, Inc., 2004 20 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

21. © The McGraw-Hill Companies, Inc., 2004 21 Steps in the CPM with Single Time Estimate 1.Activity Identification 2.Activity Sequencing and Network Construction 3.Determine the critical path —From the critical path all of the project and activity timing information can be obtained

22. © The McGraw-Hill Companies, Inc., 2004 22 Example 1. CPM with Single Time Estimate Consider the following consulting project: Develop a critical path diagram and determine the duration of the critical path and slack times for all activities. ActivityDesignationImmed. Pred.Time (Weeks) Assess customer's needsANone2 Write and submit proposalBA1 Obtain approvalCB1 Develop service vision and goalsDC2 Train employeesEC5 Quality improvement pilot groupsFD, E 5 Write assessment reportGF1

23. © The McGraw-Hill Companies, Inc., 2004 23 Example 1: First draw the network A(2)B(1) C(1) D(2) E(5) F(5) G(1) ANone2 BA1BA1 CB1CB1 DC2DC2 EC5EC5 FD,E5 GF1GF1 Act.Immed. Pred. Time

24. © The McGraw-Hill Companies, Inc., 2004 24 Example 1: Determine early starts and early finish times ES=9 EF=14 ES=14 EF=15 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=4 EF=9 ES=4 EF=6 A(2)B(1) C(1) D(2) E(5) F(5) G(1) Hint: Start with ES=0 and go forward in the network from A to G.

25. © The McGraw-Hill Companies, Inc., 2004 25 Example 1: Determine late starts and late finish times ES=9 EF=14 ES=14 EF=15 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=4 EF=9 ES=4 EF=6 A(2)B(1) C(1) D(2) E(5) F(5) G(1) LS=14 LF=15 LS=9 LF=14 LS=4 LF=9 LS=7 LF=9 LS=3 LF=4 LS=2 LF=3 LS=0 LF=2 Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.

26. © The McGraw-Hill Companies, Inc., 2004 26 Determining the Critical Path & Slack A path is a sequence of connected activities running from start to end node in a network The critical path is the path with the longest duration in the network —It is also the minimum time, under normal conditions, to complete the project —Delaying activities on the critical path will delay completion time for the project A slack is amount of scheduling flexibility —Critical activities have no slacks

27. © The McGraw-Hill Companies, Inc., 2004 27 Example 1: Critical Path & Slack ES=9 EF=14 ES=14 EF=15 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 ES=4 EF=9 ES=4 EF=6 A(2)B(1) C(1) D(2) E(5) F(5) G(1) LS=14 LF=15 LS=9 LF=14 LS=4 LF=9 LS=7 LF=9 LS=3 LF=4 LS=2 LF=3 LS=0 LF=2 Duration = 15 weeks Slack=(7-4)=(9-6)= 3 Wks SLACK=LS-ES=LF-EF A PATH IS CRITICAL IF: ES=LS, EF=LF, and EF-ES=LF-LS=D

28. © The McGraw-Hill Companies, Inc., 2004 28 CPM with Three Activity Time Estimates Task times assumed variable (probabilistic) The variability is based on the beta distribution Uses three time estimates —Optimistic —Most Likely —Pessimistic Consolidates them into one expected time Then calculates ES, EF, LS, LF, & CP as in before

29. © The McGraw-Hill Companies, Inc., 2004 29 Example 2. CPM with Three Activity Time Estimates

30. © The McGraw-Hill Companies, Inc., 2004 30 Example 2. Expected Time Calculations ET(A)= 3+4(6)+15 6 ET(A)=42/6=7

31. © The McGraw-Hill Companies, Inc., 2004 31 Example 2. Network A(7) B (5.333) C(14) D(5) E(11) F(7) H(4) G(11) I(18) Duration = 54 Days ES=0 EF=7 ES=7 EF=21 ES=21 EF=32 ES=32 EF=36 ES=36 EF=54 ES=0 EF=5.3 ES=5.3 EF=16.3 ES=7 EF=12 ES=12 EF=21 LS=0 LF=7 LS=36 LF=54 LS=32 LF=36 LS=25 LF=36 LS=19.7 LF=25 LS=25 LF=32 LS=20 LF=25 LS=21 LF=32 LS=7 LF=21

32. © The McGraw-Hill Companies, Inc., 2004 32 Example 2. Probability Exercise What is the probability of finishing this project in less than 53 days? What is the probability of finishing this project in less than 53 days? p(t < D) T E = 54 t D=53

33. © The McGraw-Hill Companies, Inc., 2004 33 (Sum the variance along the critical path.)

34. © The McGraw-Hill Companies, Inc., 2004 34 There is a 43.8% probability that this project will be completed in less than 53 weeks. p(Z < -.156) =.438, or 43.8 % (NORMSDIST(-.156) T E = 54 p(t < D) t D=53

35. © The McGraw-Hill Companies, Inc., 2004 35 Example 2. Additional Probability Exercise What is the probability that the project duration will exceed 56 weeks?

36. © The McGraw-Hill Companies, Inc., 2004 36 Example 2. Additional Exercise Solution p(Z >.312) =.378, or 37.8 % (1-NORMSDIST(.312)) t T E = 54 p(t < D) D=56

37. © The McGraw-Hill Companies, Inc., 2004 37 Time-Cost Models Basic Assumption: Relationship between activity completion time and project cost Time Cost Models: Determine the optimum point in time-cost tradeoffs — Activity direct costs — Project indirect costs — Activity completion times

38. © The McGraw-Hill Companies, Inc., 2004 38 Time-Cost Model Trade-Offs Prepare a CPM-type network listing — Normal and crash times for each — Normal and crash costs for each Determine incremental cost per unit of time each activity is expedited — Incremental cost =(CC-NC)/(NT-CT) Calculate the critical path Shorten the CP at the least cost

39. © The McGraw-Hill Companies, Inc., 2004 39 Time-Cost Model: Example For the project with the following times, find the cost of reducing its duration to its lowest possible time. If the project is reduced by just 2 days, how much would it cost? A26110 B59218 C463 8 D351 9 ActivityTimeCostTimeCostINCL=NT-CT NORMAL CRASH

40. © The McGraw-Hill Companies, Inc., 2004 40 A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF= A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF= 12 34 A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF= A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF=

41. © The McGraw-Hill Companies, Inc., 2004 41 A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF= A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF= 12 34 A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF= A B D C ES= EF= ES= EF= ES= EF= ES= EF= LS= LF= LS= LF= LS= LF= LS= LF=

42. © The McGraw-Hill Companies, Inc., 2004 42 CPM Assumptions/Limitations Project activities can be identified as entities (There is a clear beginning and ending point for each activity.) — But this is seldom true Project activity sequence relationships can be specified and networked — Sometime we do not know all project activities ahead of time

43. © The McGraw-Hill Companies, Inc., 2004 43 CPM Assumptions/Limitations Project control should focus on the critical path — But there are near-critical activities The activity times follow the beta distribution, with the variance of the project assumed to equal the sum of the variances along the critical path — But activities are infrequent. Can we assume normality? — Are we really sure that it is beta distributed?