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Project Management 2019
Project Management 2019
Project Management 2019
MANAGEMENT
INTRODUCTION
Project and Operations
Organisational works involve either project or
operations which may overlap.
Common Characteristics :
Performed by people
Constrained by limited resources
Planned,executed and controlled
Organizational structure
Culture
Style
Organisational systems
Two categories
Organisations deriving revenue from performing
projects for others e.g.
architect,engineer,consultantconstruction
contractor,government contractor
Organisations that have adopted management by
projects
They have their management systems in place to
facilitate project management.
Non project based organisations lack such system
which makes project management difficult
Organisational structure
Ranging from functional to projectized with a
variety of matrix structures in between
• Functional Organisation :Hierarchy where
each employee has one clear superior. Staff
members are grouped by specialty such as
production , marketing ,finance etc.
• Projectized organisation : Team members are
collocated, most of orgnisations resources are
involved in project work, project manager has
a great independence and authority
Matrix organisation
• Blend of functional and projectized
• Weak matrix maintain many characteristics of
functional organisation and project manager
work as a coordinator than a manager
• Strong matrix have characteristics of
projectized structure if strong project
manager
• Functional organisation can create a special
project team to handle critical project
Skills of project Manager
Leading: establishing direction, aligning
people, motivating and inspiring
Communicating
Negotiating
Problem Solving :Problem definition and
decision making
Influencing the organisation : Getting things
done(power and politics)
Social-Economic-Environmental
influences
Standard and regulations, compliances
Internationalization (Time zone difference,
holidays etc.)
Cultural influences(practice ,belief, attitude of
people)
Social- economical-environmental
sustainability
PROJECT MANAGEMENT
PROCESSES
Project processes
Process : Series of actions bringing about a
result
Project management processes
:Describe,organise,and complete work of a
project
Product oriented process : Specify and create
project’s product defined by project life cycle
Both processes overlap and interact
throughout the project e.g. scope of project
can not be defined in absence of basing
understanding of how to create the product
Process Groups
Initiating processes
Planning processes
Executing processes
Controlling processes
Closing processes
Result of one may become input for other
Overlapping activities
PROJECT
MANAGEMENT
KNOWLEDGE
AREAS
PROJECT INTERGARTION
MANAGEMENT
PROJECT INTERGARTION MANAGEMENT
• Project plan
• Performance reports
• Change requests
Tools and techniques to Integrated change
Control
• Change control system : formal documented
procedure which define how project documents to
be changed. Includes paperwork, tracking system,
processes and approval levels for authorizing
changes.
• Configuration Management :documented
procedure used to apply technical and admin
direction
• Performance measurement
• Additional planning
• PMIS
Outputs from Integrated change Control
4. Assumptions
Scope Planning
• Process of progressively elaborating and
documenting project work(scope) that produces
the product of project
• Start with initial inputs of product description,
project charter, initial definitions of constrains
and assumptions
• Outputs are scope statement and scope
management plan with the supporting detail
• Forms the basis of agreement between project
and project customer by identifying both project
objectives and deliverables
Inputs to Scope Planning
1. Product description
2.Project Charter
3. Constraints
4. Assumptions
Tools and Techniques of Scope Planning
Inspection:
• Includes activities such as
measuring,examining,and testing undertaken
to determine whether results confirm to
requirements
• Also called as reviews,product
reviews,audits,walkthroughs
Outputs from of Scope Verification
Formal Acceptance:
Documentation that client or sponsor has
accepted the product of the project phase or
major deliverables
Must be prepared and distributed
Such acceptance may be conditional especially
at the end of phase
Scope Change Control
Concerned with :
a)Influencing the factors that create scope
changes to ensure that changes are agreed upon
2. Performance Reports
2. Basis of estimates
Major processes:
Resource Planning
Cost estimating
Cost budgeting
Cost control
Project Cost Management
• It also considers effect of project decisions on the
cost of using project’s product
• E.g. limiting number of design reviews may reduce
cost of project at expense of increase in customer’s
operating cost
• Broader view of project cost is called “Life cycle
costing”
• Life cycle costing together with value engineering
used to reduce cost and time, improve quality and
performance and optimize decision making
• Use various management techniques such as
ROI,payback period,DCF
Project Cost Management
• Project cost is measured in different ways and
different times e.g. cost of procurement item
may be measured when
committed,ordered,delivered,incurred,or
recorded for accounting purpose
• When Project costs are used as component of
reward and recognition system ,controllable
and uncontrollable costs should be estimated
and budgeted separately to ensure that
reward reflect actual performance.
Resource Planning
• Involves determining what physical resources
(people equipment, material) and what quantities
of each should be used and when they would be
needed to perform project activities
• It must be closely coordinated with cost estimating
• E.g. an automotive design team should be familiar
with latest in automated assembly technique. The
requisite knowledge can be obtain by hiring a
consultant, by sending a designer for seminar on
robotics, including someone from manufacturing
as a member of a team.
Inputs to Resource Planning
1.WBS(Identifies project deliverables and
processes that will need resources and is
primary input to resource planning)
2. Historical Information
3.Scope statement (project objectives and
justifications)
4.Resource pool description (what resources are
available)
5.Organisational policies
6.Activity duration estimates
Tools and Techniques of Resource Planning
1.Expert judgement
2.Alternative Identification
• 6. Lessons learned
PROJECT QUALITY
MANAGEMENT
Project Quality Management
• Includes processes required to ensure that
project will satisfy needs for which it is
undertaken
• It includes all activities of the overall
management function that determines the
quality policy, objectives and responsibilities
• And implement them by means such as
quality planning, quality assurance, quality
control and quality improvement within the
quality system
Quality planning, quality assurance, quality
control
1.Quality planning – Identifying which quality
standards are relevant to the project and
determining how to satisfy them
2. Quality assurance – Evaluating overall project
performance on a regular basis to provide
confidence that the project will satisfy the relevant
quality standards
3. Quality control : Monitoring specific project
results to determine if they comply with relevant
quality standards and identifying ways to eliminate
causes of unsatisfactory performance
Quality Management
• The basic approach to quality management
should be compatible with ISO 9000 and
10000 series of standards and guidelines
• The generalized approach should be
compatible with
• a)Proprietary approaches to quality
management such as those recommended by
Deming,Juran,Crosby.
• b)Nonproprietary approaches such
TQM,Continuous improvement etc.
Quality Management
Project quality management must address both
management of project and product of project
Failure to meet quality requirements in either
dimensions can have negative consequences for
any or all of the project stakeholders e.g.
Meeting customer requirements by overworking
the project team may produced negative
consequences in the form of increased employee
attrition
Meeting project schedule objectives by rushing
planned quality inspections may produce negative
consequences when errors go undetected.
Quality
• Quality is “the totality of characteristics of an
entity that bear on its ability to stated or
implied needs”
• Stated or implied needs are the inputs to
developing project requirements
• A critical aspect of quality management in the
project context is the necessity to turn implied
needs into requirements through project
scope management
Grade
Project management team should not confuse
quality with grade.
• Grade is category or rank given to entities having
same functional use but different technical
characteristics
• Low quality is always a problem ,low grade may not
be
• E.g. a software product may be of high quality (no
bugs) and low grade (limited features) or of low
quality (many bugs) and high grade (many features)
• Determining and delivering the required levels of
both quality and grade are the responsibility of the
Project management team should be aware that modern
quality management compliments project management
Both disciplines recognize importance of :
Customer satisfaction: Combination of conformance to
requirements(project must produce what it said it will
produce) and fitness for use (product or service
produced must satisfy real needs)
Prevention over inspection (Cost of preventing mistake
is less than correcting them)
Management responsibility(to provide resources
required for success)
Processes within phases (repeated PDCA cycle
described by Deming is highly similar to combination of
phases and processes in project management
Quality Planning
• Involves identifying which quality standards
are relevant to project and determining how
to satisfy them
• Should be performed regularly and in parallel
with other project processes
• E.g. changes in product of the project required
to meet identified quality standards may
require cost or schedule adjustments
• Or the desired product quality may require a
detailed risk analysis of an identified problem
Inputs to Quality Planning
1. Quality Policy:
Overall intensions and directions of an
organisation with regard to quality as formally
expressed by top management
Quality policy of performing organisation can
be adopted “as is ” for project management
In case of JV, the project management team
should develop quality policy
Project stakeholder should aware of it through
information distribution
Inputs to Quality Planning
2. Scope statement
3. Product description
3.Operational definitions
Tools and techniques of Quality Assurance
1.Quality planning Tools and techniques
2.Quality Audits
Structured review of other quality management
activities.
The objective is to identify lessons learned that
can improve performance of this project or other
projects within the performing organization
Audits may be scheduled or random or may be
carried by properly trained in-house auditors or by
third parties such as quality system registration
agencies
Outputs from Quality Assurance
Quality Improvement:
• Includes taking actions to increase the
effectiveness and efficiency of the project to
provide added benefits to project stakeholders
• It require preparation of change requests or
taking of corrective action
• And will be handled according to procedures
for integrated change control
Quality Control
• Involves monitoring specific project results to
determine if they comply with relevant quality
standards and identifying ways to eliminate
causes of unsatisfactory results
• It should be performed throughout the project
• Project results includes both product results
such as deliverables and project management
results such as cost and schedule performance
• Done by quality control department
Quality Control
Project management team should have working
knowledge of statistical quality control especially sampling
and probability to help it evaluate quality control outputs
Team should know difference between:
Prevention and inspection
Attribute sampling(the result confirm or it does not) and
variable sampling(the result is rated on a continuous scale
that measures degree of conformity)
Special causes (unusual events) and random
causes(normal process variation)
Tolerances(result is acceptable if it falls within the range
specified by tolerance) and control limits(process is in
control if results fall within the control limits)
Inputs to Quality Control
1. Work results (both process and product
results, planned vs actual results)
3. Operational definitions
4.Checklists
Tools and techniques of Quality Control
1. Inspection :
• Includes activities such as measuring,
examining, and testing undertaken to
determine whether results conform to
requirements
• Conducted at any level(from single activity to
final project product)
In some application areas called as reviews,
audits or walkthroughs)
Control Charts
• Graphic displays of results, over time of a process
• Used to determine if process is in control(if differences
in results created by random variations or are unusual
events occurring whose causes must be identified and
corrected)
• When a process is in control , it should not be adjusted
• Used to monitor any type of output variable
• Used to track repetitive activities such as manufactured
lots
• Also used to monitor cost and schedule variances,
volume and frequency of scope changes, errors in
project documents or other management results to
determine if the project management process in control
Pareto diagrams
• A histogram ordered by frequency of occurrence
that shows how many results were generated by
type or category of identified cause.
• Rank ordering is used to take corrective action
• Project team should take actions to fix the
problems that are causing the greatest number of
defects first
• Pareto’s law: hold that a relatively small number of
causes will provide a large number of problems or
defects
This is referred as 80-20 principle where 80%
problems are due to 20% causes
Statistical Sampling
• Involves choosing part of population of
interest for inspection (e.g. selecting 10 engg
drawings out of 75 )
• Appropriate sampling can often reduce cost of
quality control
• Project management team should be aware of
various types of sampling techniques
Tools and techniques of Quality Control
5. Flowcharting (used in quality control to
analyze how problems occur)
6. Trend analysis : Involves using mathematical
techniques to forecast future outcomes based
on historical results
It is used to monitor technical performance
(How many errors or defects have been
identified, how many remains uncorrected)
It is used to monitor cost and schedule
performance(how many activities per period
were completed with significant variances)
Outputs from Quality Control
1. Quality improvement
2.Acceptance decision(inspected items may be
selected or rejected, rejected require rework)
3.Rework (Action taken to bring a defective or
nonconforming item into compliance with
requirements or specifications. Project team should
put effort to minimize rework)
4.Completed Checklist
5.Process adjustments(involve immediate corrective or
preventing action as a result of quality control
measurement)
PROJECT HUMAN RESOURCE
MANGEMENT
Project Human Resources Management
• Includes processes required to make most
effective use of people involved with the
project
• Includes all project stakeholders –
sponsors,customers,partners,individual
contributors
Major processes
Organisational planning :
Identifying, documenting and assigning project
roles,responsibilities and reporting
relationships
Staff Acquisition
Getting human resources needed assigned to
and working on the project
Team Development
Developing individual and group competencies
to enhance project performance
Organisational Planning
• Involves Identifying, documenting and assigning
project roles,responsibilities and reporting
relationships to individual and groups
• Individual and groups may be part of performing
organisation or they may be external
• Internal groups associated with a specific
functional department such as engineering,
marketing or accounts
• Most of the planning is done in the earliest phase
and reviewed regularly throughout the project
Inputs to Organisational Planning
1. Project Interfaces: three categories
A) Organisational interfaces (formal and informal
reporting relationships among different
organizational units)
B)Technical Interfaces (formal and informal
reporting relationships among different
technical disciplines)
C) Interpersonal Interfaces(formal and informal
reporting relationships among different
individuals working on the project)
Inputs to Organisational Planning
2. Staffing Requirement(what kind of competencies
required from what kind of individuals or groups and
in what time frames)
3. Constraints
Organisational structure of performing organisation
e.g. strong or weak matrix
Contractual agreements with unions or other
employee groups may require certain roles or
reporting relationships
Preferences of project management team e.g.
same structure that of previous successful project
Competencies of specific individuals
Tools and techniques of Organisational
planning
1. Templates
2. HR practices
3.Organisational theory
4.Stakeholder analysis
Outputs from Organisational Planning
1.Roles and responsibility assignment:
Project roles(who does what) and responsibilities(who
decides what) must be assigned to appropriate project
stakeholder
Project Roles and responsibility should be closely linked
to project scope definition
A responsibility assignment matrix(RAM) is often used
for this purpose
A high level RAM define which unit or group is
responsible for each component of WBS and lower level
RAMs are used within the groups to assign Roles and
responsibility for specific activities to particular
individual.
Outputs from Organisational Planning
2.Staffing management Plan
Describes which when and how human resources
will be brought onto and taken off the project
team
3. Organisational Chart
Graphic display of project reporting relationships.
Organisational breakdown structure(OBS) is
specific chart that shows which units are
responsible for which work packages
4. Supporting details (what alternatives, job
descriptions ,training needs)
Staff Acquisition
• Involves getting the needed human resources
assigned and working on the project
3. Recruitment practices
Tools and techniques of Staff Acquisition
1. Negotiations
Project management team may need to negotiate
with responsible functional managers to ensure
that project receives appropriately competent staff
in the necessary time frame
Project management team may need to negotiate
with other project teams within organisation to
assign scarce or specialised resources appropriately
2. Preassignments (staff assignments defined within
project charter)
3.procurenment (obtaining services of specific
individuals)
Outputs from Staff Acquisition
1. Project staff assigned (full or part time)
1. Project staff
2. Project plan
3. Staffing management plan
4. Performance report
5. External feedback (Measuring against the
expectations of those outside the projects)
Tools and techniques of Team
Development
1. Team building activities
2. general management skill
3. Reward and recognition system
4. Collocation (Placing all active project tam
members in the same physical location to
enhance their ability to perform as a team)
5. Training
Output from Team Development
1. performance improvements
3. Project Plan
Tools and techniques of Information
Distribution
1.Communication Skills
Used to exchange information
Information should be
clear,unambiguous,complete so that receiver
can receive it correctly and understood
properly
Vertical communication(up and down the
organisation) and horizontal
communication(peer to peer)
Tools and techniques of Information
Distribution
Information Retrieval system
• Information can be shared by team members and
stakeholders through a variety of methods including
manual filing system, electronic database, project
management software, and systems that allow to
technical documentation such as engg. drawings,
design specifications, test plans etc.
Information Distribution methods
• Project information distributed using methods like
project meetings, hard copy distribution, shared
access to electronic database, fax email, voice
mail,project intranet
Outputs from Information Distribution
1.Project Records : includes
correspondence,memos,documents describing
projects maintained in organized fashion
2.Work results
2. Project reports
3. Project presentations
Outputs from Administrative Closure
1.Project archives
A complete set of indexed project records
should be prepared for archiving by the
appropriate parties
2. Project Closure
Confirmation that project has met all
customer requirements for the product of the
project and customer has formally accepted
the project results and deliverables
3. Lessons learned
PROJECT RISK
MANAGEMENT
Project Risk Management
• Risk Management is systematic process of
identifying,analyzing and responding to
project risk
1. project Charter
2.Organisation’s risk management policies
3. Defined roles and responsibilities
4. Stakeholder risk tolerances
5. Template for organisation’s Risk Management
Plan.
6. WBS
Tools and techniques of Risk Management
Planning
Planning meetings:
Project teams hold planning meetings to
develop risk management plan
Attendees include project manager, project
team leaders, key stakeholders and others as
needed
They use risk management templates and
other inputs as appropriate
Output from Risk Management Planning
1. Risk Management plan :
• Describes how Risk Identification, Qualitative and
Quantitative risk Analysis,response
planning,monitoring,and control will be structured and
performed during project life cycle. It include :
Methodology:
Defines the approaches, tools and data sources that may
be used to perform risk management on this project.
Different types of assessments may be appropriate
depending upon project stage, amount of information
available and flexibility remaining in risk management
Budgeting : Establishes a budget for risk management of
a project
Risk Management plan
Roles and Responsibilities :
Defines the lead, support and risk management team
membership for each type of action in the risk management
plan
Risk management teams organized outside project office may
be able to perform more independent unbiased risk analysis
of project than those from the sponsoring project team
Timing
Defines how often project risk management process will be
performed throughout the project life cycle
Results should be developed early enough to affect decisions
Decisions should be revisited during project execution
Risk Management plan
Scoring and interpretation : appropriate for type and time of
qualitative and quantitative risk analysis being performed.
Methods and scoring must be determined in advance to
ensure consistency
Thresholds: Project owner,customer,or sponsor may have
different risk thresholds. Acceptable thresholds forms a
target against which project team will measure effectiveness
of risk response plan execution.
Reporting formats :(how results of risk management process
will be documented analysed and communicated to
stakeholders
Tracking : Documents how all facets of risk activities will be
recorded for the benefit of current project ,future needs and
lessons learned .Documents if and how risk processes will
be audited
Risk Identification
• Involves determining which risk might affect
the project and documenting their
characteristics
• It is an iterative process.
• First iteration may performed by part of
project or risk management team
• Entire project team and primary stakeholders
may make a second iteration
• Persons not involved in project may perform
final iteration
Inputs to Risk Identification
• 1. Project planning outputs:
• Risk identification requires understanding of
project’s mission, scope ,objectives of
ownwer,sponsor or stakeholders
• Outputs of other processes should be reviewed to
identify possible risk across entire project which
include project charter,WBS,Product description,
Schedule and cost estimates, resource plan,
procurement plan ,assumptions and constraints list
Inputs to Risk Identification
2.Risk Categories
Technical ,quality and performance risk(unproven or
complex )
Technology, unrealistic performance goals, changes to
technology or industry standards during project
Project management risk (poor allocation of time and
resources, inadequate quality of project plan)
Organizational risks(cost , time ,scope objectives that are
internally inconsistent, inadequate funding and resource
conflicts)
External Risks (shifting legal or regulatory
environment,labour issues, country risk, weather, force
majeure risks such as earthquake,floods,civil unrest)
Inputs to Risk Identification
3.Historical Information(From project files and
published information)
4. Contractual agreements
• 1. workout plans
• 2.corrective action
• 3.Project change requests
• 4.Updates to risk response plans
• 5.Risk database
• 6. Updates to risk identification techniques
PROJECT
PROCUREMENT
MANAGEMENT
Procurement planning
• Identifying which project needs can be satisfied by
outside supplier
• Make or buy analysis
• Contract type selection (Fixed price /cost plus
profit/time and material contract)
• Statement of work(describing procurement item in
sufficient detail to allow prospective seller to
determine if they are capable of providing the item)
• Solicitation : Obtaining responses(bids and
proposals) from prospective sellers
• Qualified sellers list
• Bidders /contractor conferences
Procurement documents
Bid and quotation (price)
Proposal (technical details)
Invitation for Bid (IFB)
Request for proposal(RFP)
Request for quotation (RFQ)
Invitation for negotiation
Contractor initial response
Evaluation Criterion
Price (Cost)
Overall /life cycle cost
Technical capability
Management approach of seller
Financial capacity
Source selection
Receipt of bid or proposal and application of
evaluation criterion to select provider
Contract Negotiation
Weighting system
Screening system
Contract administration
Contract is mutually binding agreement that obligates
the seller to provide specified product and buyer to
pay for it
• Legal relationship subject to remedy in the courts
• Also called purchase order or MOU
• Project team should be acutely aware of legal
implications of actions taken when administering the
contract
• Dispute resolution procedures
• Should maintain written documents such as warning
of unsatisfactory performance/contract changes or
clarifications
Contract closeout
CPI = EV / AC
SPI = EV / PV
Or
(ii)CPI=BCWP/ACWP=40/60=0.67
START
Durations B 5
Activity (days)
ES EF 0 5
LS LF 0 5
FL 0
Forward pass
• Consider activity A which has duration of 3 days.
Assuming that it starts at time=0,it can finish as
early as 3 days later. Thus we can enter 3 in the cell
labeled “EF” for activity A
• Activity B which has duration of 5 days. Assuming
that it starts at time=0,it can finish as early as 5
days later. Thus we can enter 5 in the cell labeled
“EF” for activity B
• Activity C is dependent on Activity A and B. Hence
both these tasks must be completed before we
began activity C.
• Activity A is completed in 3 days while B completed
in 5 days hence the earliest activity C can start in
five days, longest of the preceding activities.
Forward pass
• ES of activity C would be 5 days and as activity
C duration is 5 days, it can finish as early as 10
days
• Thus we can enter 5 in the cell labelled ES and
enter 10 in the cell labelled EF for activity C
• Following this rule we can fill ES and EF times
for activity D which is 10 days and 17 days
respectively
• Therefore the earliest this project consisting
of four activities can be completed in 17 days.
Backward Pass
• A backward pass is made through the network to
complete the latest start and latest finish times for each
activity in the network.
• To do that we must decide how late the project can finish
• Let the finish time of the project be same as earliest
completion od project which is 17 days
• If activity D has a late finish of 17 days, if we subtract 7
from 17, we have 10 days which is the latest start for
activity D
• This we enter 10 in the cell LS and 17 in the cell LF for
activity D
Backward Pass
• Proceeding in this manner we can get the cell
labelled LS and LF for other activities A,B and
C
• Therefor we are doing backward pass
calculation, the latest finish for a preceding
task will always be smallest of the latest start
times for the subsequent task(That is always
use the smallest number)
FLOAT
FLOAT
• Some tasks have flexibility in which they can
be performed in the schedule and others have
no flexibility
• The term used for this schedule flexibility is
Float
• Another term for float is Slack
• Float is calculated by subtracting ES from LS or
EF from LF
FLOAT
• Float refers to an activity and is a spare time
available in a non-critical activity which can be
utilized either by delaying the activity or by
extending its duration
• Float is utilized for smoothening of manpower
resources and equipment
• Float is measured in units of time
• A critical activity has zero float
• A non critical activity will have a float
• If TF=0 then rest of the floats are zero
FLOAT
Independent Float<=Free Float<=Total Float
An activity is critical if and only if its total float
is zero
Four types of floats
Total Float
Free Float
Interfering float
Independent Float
Total Float
Total Float
• Refer to diagram
• Consider an activity B
• ES of B is 7 and LF=18 So maximum time available is
18-7 = 11
• Duration of B is 5 days
• Spare Time=11-5=6 days
• This spare time of 6 days is for activity B.If absorbed,
then neither it changes the critical path nor the
project duration. This is called total float of B
• Thus Total Float (TF) of an activity is : TF=LF-ES-
Duration of the activity
Free Float
Free Float
Total Float of C = LFT-ES-duration of activity
= 18-7-5=6
Total float of H = LFT-ES-duration of activity= 23-17-
5=1
Free Float= ES of the succeeding activity-ES of the
preceding activity(Whose free Float we are finding)-
Duration of the preceding activity under
consideration
FF of activity C =17-7-5= 5 days
Free float is spare time available in a preceding
activity if observed then it will not delay the start of
succeeding activity
Interfering Float
• Interfering Float = Total Float –Free Float
• Interfering Float of C = 6 days-5 days = 1 day
The part of the total float which causes
reduction in the float of the successor
activities is called Interfering Float
It indicates the portion of activity float which
can not be consumed without affecting
adversely the float of the subsequent activity
or activities
Independent Float
• Independent Float of an activity = ES of the
succeeding activity - LF of the preceding
activity(whose independent float we are
finding)- Its duration
• Independent Float of an activity C =17-13-5
=-1=0
• Independent Float is always either equal to or
less than the free float of an activity.
• If negative value is obtained, the independent
float is taken to be zero.
Example : find all four Time estimates
Activity A B C D E F G
Duration of activity in days 6 4 3 2 10 5 4
Preceding activity ____ A A B B C,D E,F
Forward and backward pass- ES,EF
Forward Pass Backward pass
Four time estimates of each activity
Te = a+4m+b/6
• = b-a/6
Activity Nodes Time duration in Days Te σ²
a m b
1--2 2 4 6 4 2//3 4//9
1--3 6 6 6 6 0 0
1--4 6 12 24 13 3 _____
2--3 2 5 8 5 1 1
2--5 11 14 23 15 2 ____
3--4 15 24 45 26 5 25
3--6 3 6 9 6 1 ____
4--6 9 15 27 16 3 9
5--6 4 10 16 10 2 ____
a = Optimistic Time σ² only for critical actvities
m=Most likely time b-a/6
b=pessimistic time
All paths
Mt=Xt+Xt-1+--------Xt-n+1// N
Results of Moving Average
Supplier $ MA Error Error squared
1 9
2 8
3 9 8.667 0.333 0.111
4 12 9.667 2.333 5.444
5 9 10.000 -1.000 1.000
6 12 11.000 1.000 1.000
7 11 10.667 0.333 0.111
8 7 10.000 -3.000 9.000
9 13 10.333 2.667 7.111
10 9 9.667 -0.667 0.444
11 11 11.000 0 0
12 10 10.000 0 0
Weighted moving average method-Example
• The manager of a restaurant wants to make decision
on inventory and overall cost.
• He wants to forecast demand for some of the items
based on weighted moving average method. For the
past three months he experienced a demand for
pizzas as follows:
• Find the demand for the month of January by
assuming suitable weights to demand data.
Month Demand
October 400
November 480
December 550
Exponential Smoothing
• Popular scheme to produce a smoothed Time
Series.
• Whereas in Single Moving Averages past
observations are weighted equally, Exponential
Smoothing assigns exponentially decreasing
weights as observation get older.
• Recent observations are given relatively more
weight in forecasting than older observations.
• In case of moving averages, weights assigned to
observations are same and are equal to 1/N.
• In exponential smoothing, there are one or more
smoothing parameters to be determined (or
estimated) and these choices determine weights
assigned to the observations.
Example
You are given the following information about
the demand of an item
i) Calculate forecasted values using a) 3-Monthly
b) 5-monthly Moving averages
Ii) Calculate forecasted values using 4-monthly
weighted moving averages with weights 4:3:2:1,
largest weight being for the most recent value
Month 1 2 3 4 5 6 7 8 9 10 11
Demand 220 228 217 219 258 241 239 244 256 260 265
Demand forecast using Moving average and weighted moving average
method
Forecast
3-Monthly 5-Monthly 4-Monthly
moving moving Weighted
Month Demand average average moving average
1 220
2 228
3 217
4 219 221.70
5 258 221.30 220.30
6 241 231.30 228.40 235.10
7 239 239.30 232.60 239.30
8 244 246.00 234.80 241.40
9 256 241.30 240.20 243.30
10 260 246.30 247.60 247.50
11 265 253.30 248.00 253.50
12 260.30 252.80 259.60
Solution
Forecast for 4th month = Forecast for 1st month
+Forecast for 2nd month +Forecast for 3rd month
=220+228+217/3=221.7
For 4 months weighted average month’s forecast
the only difference is that the demand are given
different weightages with the most demand
having the highest weightage which in this case is
4
Forecast for 5th month =
219*4+217*3+228*2+220*1=220.3 units
Example-2
• An initial forecast for a given series of demand
is 20.using a smoothing constant of α =
0.2.Find the forecast for the 9th period for the
following data of demand. An Alternative
forecast was generated using a three-year
moving average. Which is better forecasting
method
Year 1 2 3 4 5 6 7 8
Demand 22 24 26 18 16 22 18 22
Forecast Using exponential Smoothing
method(α=0.2)
Forecast for
Demand( period
Year St) Forecast(Ft) (St-Ft)^2 t+1=Ft+α(St-Ft)
1 22 20 4 20.4
2 24 20.40 12.96 21.12
3 26 21.12 23.81 22.10
4 18 22.10 16.81 21.28
5 16 21.28 27.88 20.22
6 22 20.22 3.17 20.58
7 18 20.58 6.66 19.25
8 22 19.25 7.56 19.80
9 19.80
Total 102.85
Solution
Mean Square Error (MSE)
=Σ(St-Ft)^2/n=102.85/8=12.86
Here n =8
i = Period number
n = Number of periods
included in
calculating the mean
Example
Oct.
Sep. Nov.
Aug.
Base 120 145 138 129
Demand
Base 136 132 135 133
Forecast
Example
1 1000
2 1000
3 2000
4 10000
Solution
Years Cashflows(Rs) Pv @10% Present value Pv @15% Present value
1 5000 0.847 4235 0.862 4310 10000 0.820 8200 0.833 8330
2 15000 0.718 10770 0.743 11145 10000 0.672 6720 0.694 6940
3 30000 0.609 18270 0.641 19320 10000 0.551 5510 0.579 5790
4 20000 0.516 10320 0.552 11040 10000 0.451 4510 0.482 4820
1 2000
2 2000
3 2000
4 1000
5 1000
Years Cash Inflows PV @ 10% Present value