2 Project Management PowerPoint Slides by Jeff Heyl For Operations Management, 9e by Krajewski/Ritzman/Malhotra © 2010 Pearson Education 2–1 Projects Projects are an interrelated set of activities with a definite starting and ending point, which results in a unique outcome from a specific allocation of resources Projects are common in everyday life The three main goals are to:  Complete  Not the project on time exceed the budget  Meet the specifications to the satisfactions of the customer 2–2 Projects Project management is a systemized, phased approach to defining, organizing, planning, monitoring, and controlling projects Projects often require resources from many different parts of the organization Each project is unique Projects are temporary A collection of projects is called a program 2–3 Defining and Organizing Projects Define the scope, time frame, and resources of the project Select the project manager and team Good project managers must be  Facilitators  Communicators  Decision makers Project team members must have  Technical competence  Sensitivity  Dedication 2–4 Organizational Structure Different structures have different implications for project management Common structures are  Functional  Pure project  Matrix 2–5 Planning Projects There are five steps to planning projects Defining the work breakdown structure Diagramming the network Developing the schedule Analyzing the cost-time trade-offs Assessing risks 2–6 Work Breakdown Structure A statement of all the tasks that must be completed as part of the project An activity is the smallest unit of work effort consuming both time and resources that the project manager can schedule and control Each activity must have an owner who is responsible for doing the work 2–7 Work Breakdown Structure Relocation of St John’s Hospital Organizing and Site Preparation Level Physical Facilities and Infrastructure Select administration staff Purchase and deliver equipment Site selection and survey Construct hospital Select medical equipment Develop information system Prepare final construction plans Install medical equipment Bring utilities to site Train nurses and support staff Interview applicants for nursing and support staff Level Level Figure 2.1 2–8 Diagramming the Network Network diagrams use nodes and arcs to depict the relationships between activities Benefits of using networks include Networks force project teams to identify and organize data to identify interrelationships between activities Networks enable the estimation of completion time Crucial activities are highlighted Cost and time trade-offs can be analyzed 2–9 Diagramming the Network Precedent relationships determine the sequence for undertaking activities Activity times must be estimated using historical information, statistical analysis, learning curves, or informed estimates In the activity-on-node approach, nodes represent activities and arcs represent the relationships between activities – 10 Solved Problem TABLE 2.2 | ELECTRIC MOTOR PROJECT DATA Activity Normal Time (days) Normal Cost ($) Crash Time (days) Crash Cost ($) Immediate Predecessor(s) A 1,000 1,300 None B 1,400 2,000 None C 2,000 2,700 None D 1,200 1,400 A E 900 1,100 B F 11 2,500 3,750 C G 800 1,450 D, E H 300 500 F, G – 77 Solved Problem SOLUTION a The network diagram is shown in Figure 2.10 Keep the following points in mind while constructing a network diagram Always have start and finish nodes Try to avoid crossing paths to keep the diagram simple Use only one arrow to directly connect any two nodes Put the activities with no predecessors at the left and point the arrows from left to right Be prepared to revise the diagram several times before you come up with a correct and uncluttered diagram A D Finish G Start B E C F 11 H Figure 2.10 – 78 Solved Problem b With these activity times, the project will be completed in 19 days and incur a $700 penalty Using the data in Table 2.2, you can determine the maximum crash-time reduction and crash cost per day for each activity For activity A Maximum crash time = Normal time – Crash time = days – days = day Crash cost – Normal cost CC – NC Crash cost = = per day Normal time – Crash time NT – CT = $1,300 – $1,000 days – days = $300 – 79 Solved Problem Activity Crash Cost per Day ($) Maximum Time Reduction (days) A 300 B 200 C 700 D 200 E 200 F 250 G 650 H 100 2 – 80 Solved Problem TABLE 2.3 Stage | PROJECT COST ANALYSIS Crash Activity Time Reduction (days) — — H F Resulting Critical Path(s) Project Duration (days) Project Direct Costs, Last Trial ($) Crash Cost Added ($) Total Indirect Costs ($) Total Penalty Costs ($) Total Project Costs ($) C-F-H 19 10,100 — 3,800 700 14,600 C-F-H 17 10,100 200 3,400 500 14,200 A-D-G-H 15 10,300 500 3,000 300 14,100 B-E-G-H C-F-H – 81 Solved Problem Table 2.3 summarizes the analysis and the resultant project duration and total cost The critical path is C–F–H at 19 days, which is the longest path in the network The cheapest activity to crash is H which, when combined with reduced penalty costs, saves $300 per day Crashing this activity for two days gives A–D–G–H: 15 days, B–E–G–H: 15 days, and C–F–H: 17 days Crash activity F next This makes all activities critical and no more crashing should be done as the cost of crashing exceeds the savings – 82 Solved Problem An advertising project manager developed the network diagram in Figure 2.11 for a new advertising campaign In addition, the manager gathered the time information for each activity, as shown in the accompanying table a Calculate the expected time and variance for each activity b Calculate the activity slacks and determine the critical path, using the expected activity times c What is the probability of completing the project within 23 weeks? Finish D A Start E C G B F Figure 2.11 – 83 Solved Problem Time Estimate (weeks) Activity Optimistic Most Likely Pessimistic Immediate Predecessor(s) A — B — C 3 B D 13 14 A E 12 A, C F 16 B G E, F – 84 Solved Problem SOLUTION a The expected time and variance for each activity are calculated as follows te = Activity a + 4m + b Expected Time (weeks) Variance A 4.0 1.00 B 5.5 0.69 C 3.5 0.25 D 12.0 1.78 E 6.5 2.25 F 9.0 2.78 G 4.5 0.69 – 85 Solved Problem SOLUTION b We need to calculate the earliest start, latest start, earliest finish, and latest finish times for each activity Starting with activities A and B, we proceed from the beginning of the network and move to the end, calculating the earliest start and finish times Activity Earliest Start (weeks) Earliest Finish (weeks) A 0 + 4.0 = 4.0 B 0 + 5.5 = 5.5 C 5.5 5.5 + 3.5 = 9.0 D 4.0 4.0 + 12.0 = 16.0 E 9.0 9.0 + 6.5 = 15.5 F 5.5 5.5 + 9.0 = 14.5 G 15.5 15.5 + 4.5 = 20.0 – 86 Solved Problem Based on expected times, the earliest finish date for the project is week 20, when activity G has been completed Using that as a target date, we can work backward through the network, calculating the latest start and finish times Activity Latest Start (weeks) Latest Finish (weeks) G 15.5 20.0 F 6.5 15.5 E 9.0 15.5 D 8.0 20.0 C 5.5 9.0 B 0.0 5.5 A 4.0 8.0 – 87 Solved Problem 4.0 D 16.0 Finish 8.0 12.0 20.0 0.0 A 4.0 4.0 4.0 9.0 8.0 9.0 E 15.5 6.5 15.5 C Start 5.5 5.5 0.0 0.0 B 5.5 3.5 9.0 9.0 G 20.0 5.5 15.5 5.5 15.5 4.5 20.0 F 5.5 Figure 2.12 6.5 9.0 14.5 15.5 – 88 Solved Problem Start (weeks) Activity Earliest Latest Finish (weeks) Earliest Latest Slack Critical Path A 4.0 4.0 8.0 4.0 No B 0.0 5.5 5.5 0.0 Yes C 5.5 5.5 9.0 9.0 0.0 Yes D 4.0 8.0 16.0 20.0 4.0 No E 9.0 9.0 15.5 15.5 0.0 Yes F 5.5 6.5 14.5 15.5 1.0 No G 15.5 15.5 20.0 20.0 0.0 Yes Path A–D A–E–G B–C–E–G B–F–G Total Expected Time (weeks) Total Variance + 12 = 16 1.00 + 1.78 = 2.78 + 6.5 + 4.5 = 15 1.00 + 2.25 + 0.69 = 3.94 5.5 + 3.5 + 6.5 + 4.5 = 20 0.69 + 0.25 + 2.25 + 0.69 = 3.88 5.5 + + 4.5 = 19 0.69 + 2.78 + 0.69 = 4.16 – 89 Solved Problem So the critical path is B–C–E–G with a total expected time of 20 weeks However, path B–F–G is 19 weeks and has a large variance c We first calculate the z-value: z= T – TE σ 23 – 20 =  3.88 = 1.52 Using the Normal Distribution Appendix, we find the probability of completing the project in 23 weeks or less is 0.9357 Because the length of path B–F–G is close to that of the critical path and has a large variance, it might well become the critical path during the project – 90 – 91 ... help managers achieve the objectives of the project Managers can Estimate the completion time by finding the critical path Identify start and finish times for each activity Calculate the amount... Early Start and Early Finish Times To compute the latest start and latest finish times, we begin by setting the latest finish activity time of activity K at week 69, which is the earliest finish