Competing with Time

Project Management
When to use:
n Management complex projects
Project Management n Many parallel tasks
n Deadlines and milestones must be met
n Difficult to know “ what to do first”
first”
Tuesday, May 9, 2006
n Difficult to know when project is in trouble
n Often have competition for limited resources

Project Management Project Management

Examples Techniques
n Critical Path Method (CPM)
n Building a new airport – Developed by DuPont (1950’
(1950’s)
n Designing a new computer product – Plan and control maintenance of chemical plants
n Launching an advertising campaign – Credited with reducing length of maintenance shutdown
n Construction projects of all types by 40%

n Maintenance projects n Project Evaluation and Review Technique

n Community service projects
(PERT)
– Developed by Navy (early 1960’
1960’s)
– Plan and control the Polaris missile project
– Credited with speeding up project by 2 years

Project Management

Critical Path Method (CPM)

Critical Path n Graphical method of portraying relationship of

project activities

Method n An activity
activityis
is any discrete part or task of a project
which takes resources and time to complete

(CPM) n Activities exhibit precedence relations (some must

be completed before others can start)
n Activities with their precedence relations form a
project network
n Critical Path Method finds the longest path
through the resulting project network

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 Critical Path Method Critical Path Method

Precedence Relations Simple Project Network

Activity Immediate Predecessor Duration (days) B

B
A

B A
A D
D
C

D C
C

Critical Path Method Critical Path Method

Precedence Relations Simple Project Network

Activity Immediate Predecessor Duration (days) B

B
A (Start) 4

B A 3 A
A D
D
C A 5

D B,C 2 C
C

Project Network

Critical Path Method Critical Path Method

Activity Start/Finish Times Activity Start/Finish Times

Activity
Early Name Early
Start Finish
Time Time

ES EF ES EF

LS LF LS LF

Late Late
Start Finish
Time Activity Time
Duration

2
 Critical Path Method Critical Path Method

Finding the Critical Path Finding the Critical Path

4 B 7
Start at B
time t=0 3 6 3 9
0 A 4 D 11
A D 9
0 4 4 9 2 11
4 2
C 4 C 9
4 5 9
5

Critical Path Method Critical Path Method

Finding the Critical Path Finding the Critical Path

4 B 7 4 B 7 S=2
S=0-0=4-4=0 6 3 9 S=0 6 3 9 S=0
0 A 4 9
D 11 0 A 4 9
D 11
0 4 4 9 2 11 0 4 4 9 2 11
4 C 9 4 C 9
4 5 9 4 5 9 S=0

Activity Slack: S = EFT-EST = LFT-EFT Critical Path: Path with zero activity slacks

Critical Path Method

CPM Terminology Example
n Critical Path:
Path: the chain of activities along which the Suppose you are an advertising manager responsible for
delay of any activity will delay the project the launch of a new media advertising campaign. The
n Early Start Time (ES):
(ES): the earliest that an activity could campaign (project) has the following activities:
possibly start, given precedence relations
n Late Start Time (LS):
(LS): the latest that an activity could Activity Predecessors Time
possibly start without delaying the project A. Media bids none 2 wks
B. Ad concept none 6
n Early Finish Time (EF) : the earliest that an activity
C. Pilot layouts B 3
could possibly finish
D. Select media A 8
n Late Finish Time (LF) : the latest that an activity could E. Client checkoff A,C 6
possibly finish without delaying the project F. Pre-production B 8
n Activity Slack:
Slack: the amount of “ play
play”” in the timing of the G. Final production E,F 5
activity; slack = EFT-
EFT-EST = LFT-
LFT-EFT H. Launch campaign D,G 0

3
 CPM Analysis

Example Project Network

D
D
88
Program Evaluation
AA
22

EE
HH
and
Start
Start 00
66
CC
33 Review Technique
BB
66
GG
55
(PERT)
FF
88

Project Management PERT Analysis

Project Evaluation and Review Simple Project Network
Technique (PERT)
n Similar to Critical Path Method (CPM)
n Accounts for uncertainty
uncertaintyin
in activity B
B
duration estimates
n Provides estimates of project duration A
A D
D
probabilities
n Best used for highly uncertain projects
– new product development C
C
– unique or first-
first-time projects
– research and development

PERT Analysis PERT Analysis

A Simple Example Beta Distribution Assumption

a m b Assume a “Beta” distribution
Most Most Most
Activity
Optimistic Likely Pessimistic
density

A 2 3 10
B 1 2.5 7
C 4 5 6
D 0.5 1.5 5.5 activity
a m b duration

4
 PERT Analysis
PERT Analysis
Beta Distribution Assumption
Expected Time and Variance
a + 4m + b
expected

density
Expected Time =
6
duration
(b - a)2
Variance =
36
activity
a m b duration

PERT Analysis PERT Analysis

Expected Time and Variance Time and Variance Example

Activity A
Expected Critical
Activity Variance
a + 4m + b 2+4(3)+10 4.0 Time Path?
ET = = =
6 6 A 4 1.778
B
(b - a)2 (10-2)2
Var =
36
=
36
= 1.778 C
D

PERT Analysis PERT Analysis

Time and Variance Example Probability of Completion

What is the probability that a project will be completed
by a specified due date?
Expected Critical
Activity Variance
Time Path? Due Date - Expected Completion Date
z=
A 4 1.778 Sum of the Variances on the Critical Path

B 3 1.0
Normal Distribution
C 5 0.111
D 2 0.694 z

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 PERT Analysis PERT Analysis

Completion Probability Example Completion Probability Example

What is the probability of completing the project within What is the probability of completing the project within
12 days? 12 days?

12 - 11
z= = 0.622 z = 0.622
1.778 + 0.111 + 0.694
From a Z-table for standard Normal distributions:

Probability of completion = 0.7324

PERT Analysis PERT Analysis

Completion Probability Example Larger Example

What is the probability of completing the project within Suppose the duration of the activities of the ad
12 days? campaign are, in fact, uncertain:
(a) (m) (b)
z = 0.622 Activity Preds Optimistic Likely Pessimistic
A. none 1 2 3 wks
B. none 4 6 8
Probability of completion = 0.732 C. B 3 3 3
D. A 2 8 10
Conclusion: E. A,C 3 6 9
F. B 1 8 15
There is about a 73% chance of completing G. E,F 4 5 6
the project in 12 days or less H. D,G 0 0 0

PERT Analysis
PERT Analysis

Larger Example Activity Statistics

Suppose the duration of the activities of the ad
Activity D
campaign are, in fact, uncertain:
(a) (m) (b) Expected Activity Duration for “D”:
Activity Preds Optimistic Likely Pessimistic
A. none 1 2 3 wks a + 4m + b 2+4(8)+10
B. none 4 6 8 ET = = = 7.33
C. B 3 3 3 6 6
D. A 2 8 10
E. A,C 3 6 9
F. B 1 8 15
G. E,F 4 5 6
H. D,G 0 0 0

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 PERT Analysis
PERT Analysis
Activity Statistics Project Duration Statistics
Activity D
Activity Critical? Mean Var C.P. Var
Expected Activity Duration for “D”: A. 2 0.11
B. 6 0.44
a + 4m + b 2+4(8)+10 C. 3 0.00
ET = = = 7.33 D. 7.33 1.78
6 6
E. 6 1.00
F. 8 5.44
Variance of Activity Duration for “D”: G. 5 0.11
H. 0 0.00
(b - a)2 (10-2)2
Var = = = 1.78
36 36

PERT Analysis PERT Analysis

Example Project Network Example Project Network

DD DD
7.33
7.33 7.33
7.33
AA AA
22 22
HH HH
Start EE 00 Start EE 00
Start Start
66 66
CC CC
33 33

BB G BB G
G G
66 55 66 55

FF FF
88 88

PERT Analysis PERT Analysis

Example Project Network Project Duration Statistics

DD
7.33
7.33 Activity Critical? Mean Var C.P. Var
AA
22 A. 2 0.11
HH
B. Yes 6 0.44 0.44
EE
Start
Start 66
00 C. Yes 3 0.00 0.00
CC
33
D. 7.33 1.78
E. Yes 6 1.00 1.00
BB GG
F. 8 5.44
66 55 G. Yes 5 0.11 0.11
FF H. Yes 0 0.00 0.00
88

Critical Path Duration = 20 days Critical Path Variance = σ 2 = 1.55

7
 PERT Analysis PERT Analysis

Using Project Statistics Using Project Statistics

What is the probability that the ad campaign What is the probability that the ad campaign
can be completed in 18 weeks? 20? 24? can be completed in 18 weeks? 20? 24?

x -µ 18 - 20
18 weeks: Z= = -1.61 18 weeks:
σ =sqrt(1.55) Z = -1.61 Prob(x <18) = 5.4%

Prob(x <18) = 1 - 0.9463 = 0.054 or 5.4% 20 weeks: Z = 0.00 Prob(x <20) = 50%
24 - 20 = 3.21
24 weeks: Z=
sqrt(1.55)
Prob(x <24) = 0.993 or 99.3%

PERT Analysis

Using Project Statistics Critical Path

What is the probability that the ad campaign
can be completed in 18 weeks? 20? 24? n Slack times along the critical path are equal to
zero. Slack = LF - EF = LS - ES
n The critical path is the path with the longest
18 weeks: Z = -1.61 Prob(x <18) = 5.4% duration in the network
20 weeks: Z = 0.00 Prob(x <20) = 50% n Project cannot be completed in less than the
time of the critical path
24 weeks: Z = 3.21 Prob(x <24) = 99.3% n Managerial implications?

Project Crashing Project Crashing

n Crashing reduces project time by expending
additional resources n Would you ever crash (i.e. spend money on shortening) a
non-- critical activity? Why?
non
n Crash time is the amount of time an activity is
reduced n If you had several critical activities that you could crash,
n Crash cost is the cost of reducing an activity’
activity’s how would you decide which one, if any, to select?
time n What can happen with your non-
non- critical activities and
n The goal of crashing is to reduce a project’
project’s their slack times as you crash activities along the critical
duration at minimum cost path?

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 Crashing Example Crashing G by 20 days

B 60 C 65 B 60 C 65
A E A E
D 10 D 10
5 20 5 20
F 45 F 45
G 100 G 80

170 150

Critical activities AFGE Critical activities ABFCGE

Crashing E by 13 days Crashing A by 3 days

B 60 C 65 B 60 C 65
A E A E
D 10 D 10
5 7 2 7
F 45 F 45
G 80 G 80

137 134

Critical activities ABFCGE Critical activities ABFCGE

Crashing B&G by 15 days Crashing C&G by 10 days

B 45 C 65 B 45 C 55
A E A E
D 10 D 10
2 7 2 7
F 45 F 45
G 65 G 55

119 109

Critical activities ABFCGE Critical activities ABFCGE

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 Crashing C&F by 20 days

B 45 C 35
A E
D 10
2 7
F 25
G 55

89

Critical activities ABFCGE

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