Production and Operations

Management Systems

Chapter 7: Project Management

Sushil K. Gupta
Martin K. Starr

2014

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 After reading this chapter, you should
be able to (continued):
 Draw project network diagrams.
 Find critical paths and project durations.
 Calculate early start, early finish, late start and late finish
times of activities.
 Explain how to use forward-pass calculations to determine the
shortest feasible time for project completion.
 Explain how to use backward-pass calculations to determine
which project activities are on the critical path.

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 After reading this chapter, you should
be able to (continued):
 Describe what slack means; explain how to derive it.
 Crash activities (including multiple paths) to reduce project duration;
perform time-cost tradeoff analysis.
 Analyze probabilistic projects; explain when deterministic and
probabilistic estimates for activity times apply.
 Show how to use optimistic and pessimistic activity time estimates to
obtain a variance measure for activity times.
 Identify implications of limited resources.

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 Introduction
Projects consist of a set of goal-oriented activities that end when the goal is
achieved.

Such undertakings are time-based endeavors and have a finite planning

horizon.

Projects are special work configurations designed to accomplish singular or

nearly singular goals.

Examples include: putting on one play, writing new software, constructing a

building, launching a new product, redesigning an established traditional
hotel, and developing a new service etc.

In this presentation we discuss management of projects.

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 Classification of Projects
Projects can be classified according to the following criteria:

Degree of simplicity to change things.  

Degree of complexity
. .
reflecting the number of people, teams,
components and activities.
Frequency of repetition.
Number of new activities involved.

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 Managing Projects
Competent project management methods keep track of what is required at start
up, what has been done as it progresses and what still needs to be done.

Good project methods point to activities that are critical for completion.

Project managers expedite important activities that seem to be slipping.

These points are part of the five project life cycle stages (below):

1.Begin by describing goals which requires developing and specifying the

desired project outcomes.  

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 Managing Projects (continued)
1. On prior page

2. Planning the project requires specifying (in detail) the activities that are
essential to accomplish the goals. It involves planning the management
of the project including the timing of the activities.

3. Carrying out the project requires doing the activities as scheduled.

4. Completing the project can mean disbanding work groups and closing
down the project-management team.

5. The use of continuous project teams is an increasingly attractive option.

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 Project Management Origins
Starting about 1957, two similar approaches to large-scale project
network planning and tracking were begun at separate locations and for
different reasons. These were:

PERT—program evaluation review technique

CPM—critical path method

PERT was developed by the U.S. Navy Special Projects Office in

conjunction with Booz Allen Hamilton for the Polaris submarine
launched missile project.

There were about 100,000 activities divided amongst thousands of

suppliers.
 

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 Project Management Origins (continued)
CPM was a similar method developed by DuPont and Remington Rand, which later became
Unisys. It was used to design and coordinate chemical plant operations.

The essential difference between PERT and CPM is in specifying the times for performing
various activities.

PERT was used for projects where the activity times were not certain because project
managers were unfamiliar with the activities.

On the other hand the projects and activities were familiar to the project managers in the
case of CPM.

These days the distinction between PERT and CPM seems to be disappearing and together
these are called PERT/CPM or simply network techniques. These two methods share the
notion of a critical path as discussed later in the chapter.

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 Project Network
The following steps are required to utilize these network models.

Make a list of all activities that are required to complete the project.

Establish the precedence relationships among activities and document

the rationale for these relationships.

Estimate the time to perform each task or activity using one of the
following two options.
Option 1: deterministic estimates for activity times.
Option 2: probabilistic estimates for activity times.

Draw the precedence diagram (of project activities).

Develop a project schedule.

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 Project Management Example

Activity
Immediate Immediate Time Activity on Node (AON) Diagram
Predecessors Followers (Weeks)
A None D 9
B None E,F 5
C None G 7
D A H 12
E B H 8
F B I 6
G C I 11
H D,E I 5
I F,G,H J 4
J I None 10

Note: Either Immediate Predecessors or Immediate Followers

need to be specified.

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 Finding Critical Path and Project
Duration
Activity
Time D
(Weeks)
A H
A 9
E
B 5
C 7 B I J
D 12
E 8 F
F 6 C
G 11
H 5 G
I 4
J 10

Paths Length
A D H I J 40 Critical Path
B E H I J 32
B F I J 25
C G I J 32
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 Early Start and Early Finish Times
Early Early
D
Time Start Finish
Activity A H
(Weeks) Time Time E
(Weeks) (Weeks) B I J
A 9 0 9 F
C
B 5 0 5
G
C 7 0 7
D 12 9 21
Early Finish Time = Early Start Time + Activity Time
E 8 5 13
F 6 5 11
G 11 7 18
H 5 21 26
I 4 26 30
J 10 30 40

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 Late Start and Late Finish Times
Late Late
Time Start Finish D
Activity
(Weeks) Time Time A H

(Weeks) (Weeks) E
B I J
A 9 0 9 F
C
B 5 8 13 G
C 7 8 15
D 12 9 21
E 8 13 21
Late Start Time = Late Finish Time - Activity Time
F 6 20 26
G 11 15 26
H 5 21 26
I 4 26 30
J 10 30 40

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 Slack Time
Early Late
Early Start Late Start Slack
Time Finish Finish
Activity Time Time Time
(Weeks) Time Time
(Weeks) (Weeks) (Weeks)
(Weeks) (Weeks)
A 9 0 9 0 9 0
B 5 0 5 8 13 8
C 7 0 7 8 15 8
D 12 9 21 9 21 0
E 8 5 13 13 21 8
F 6 5 11 20 26 15
G 11 7 18 15 26 8
H 5 21 26 21 26 0
I 4 26 30 26 30 0
J 10 30 40 30 40 0
Paths Length
A D H I J 40 Critical Path

Slack Time = Late Finish - Early Finish = Late Start - Early Start B E H I J 32
B F I J   25
C G I J   32
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Reducing Project Duration:
Crashing of Activities

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 Data for Crashing
Normal Cost of Maximum
Immediate Crash Time Normal Crash
Activity Time Crashing/ Crashing
Predecessor (s) (weeks) Cost ($) Cost ($)
(weeks) Week Possible
A None 9 6 $13,000 $15,550 $850 3
B None 5 4 $7,000 $7,900 $900 1
C None 7 5 $15,000 $15,800 $400 2
D A 12 8 $12,000 $14,800 $700 4
E B 8 5 $9,000 $10,500 $500 3
F B 6 4 $5,000 $6,200 $600 2
G C 11 9 $13,000 $14,000 $500 2
H D,E 5 4 $8,000 $9,000 $1,000 1
I F,G,H 4 3 $3,000 $3,500 $500 1
J I 10 8 $12,000 $15,000 $1,500 2
        $97,000 $112,250   

Cost of Crashing per week = (Crash Cost - Normal Cost)/(Normal Time - Crash Time)
Critical Path
Maximum Crashing Possible = Normal Time - Crash Time
A-D-H-I-J

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 Crashing Process
  Schedule 1 Schedule 2 Schedule 3 Schedule 4 Schedule 5 Schedule 6
Normal Crash (I) by Crash (D) Crash (A) by Crash (H) Crash (J) by
PATH
Schedule 1 weekk by 4 weeks 3 weeks by 1 week 2 weeks

A-D-H-I-J 40 39 35 32 31 29
B-E-H-I-J 32 31 31 31 30 28
B-F-I-J 25 24 24 24 24 22
C-G-I-J 32 31 31 31 31 29

Activity Cost 97,000 97,500 100,300 102,850 103,850 106,850

Crashing Cost   500 2,800 2,550 1,000 3,000

=700*4 =850*3 =1500*2
Cost of Crashing   500 (2800) (2550) 1000 (3000)

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 Time Cost Trade-off
Project Time Activity Cost Fixed Cost Total Cost
29 106,850 23,200 130,050
30 105,350 24,000 129,350
31 103,850 24,800 128,650
32 102,850 25,600 128,450
33 102,000 26,400 128,400
34 101,150 27,200 128,350
35 100,300 28,000 128,300
36 99,600 28,800 128,400
37 98,900 29,600 128,500
38 98,200 30,400 128,600
39 97,500 31,200 128,700
40 97,000 32,000 129,000
       
Fixed Cost/Week 800    
A project time of 35 weeks minimizes the total cost.

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Project Management - Probabilistic

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 Probabilistic PERT
Most Expected Variance of
Immediate Optimistic Pessimistic
Activity Likely Activity Activity
Predecessor (s) Time Time
Time Time Times
A None 5.00 8.00 11.00 8.00 1.000
B None 2.00 6.00 10.00 6.00 1.778
C None 3.00 3.00 3.00 3.00 0.000
D A 8.00 9.00 10.00 9.00 0.111
E B 3.00 5.00 10.00 5.50 1.361
F B 2.00 4.00 7.00 4.17 0.694
G C 3.00 5.00 10.00 5.50 1.361
H D,E 3.00 4.00 5.00 4.00 0.111
I F,G,H 6.00 9.00 11.00 8.83 0.694
J I 2.00 5.00 8.00 5.00 1.000

Expected Activity Time = (Optimistic Time + 4* Most Variance of Activity Times = Square of {(Pessimistic
Likely Time + Pessimistic Time)/6 Time - Optimistic Time)/6}

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AON Diagram

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Probability of Project Completion
Project Due Date 36  
Expected Standard Probability of
Variance of
Paths Time of the Deviation z-Value completing the path
the Path
Path of the Path by due date
A-D-H-I-J 34.83 2.92 1.71 0.683 0.7527
B-E-H-I-J 29.33 4.94 2.22 2.998 0.9986
B-F-I-J 24.00 4.17 2.04 5.879 1.0000
C-G-I-J 22.33 3.06 1.75 7.818 1.0000

The probability of completing the project by the due date is assumed to be the
probability of completing the critical path by the due date.

z-Value = (Project Due Date - Expected Time of the Path)/Standard Deviation

For a given value of z, the Excel function "=NORMSDIST(z)" can be used to find
probability or z tables (included in the appendix) can be used.

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 Resource Management
Resource management switches extra resources from places where they are not essential
to places where they could be used immediately, that is, balance resource assignments
across activities over time.

Resource management has two functions – resource leveling and resource scheduling.

In resource leveling the goal is to minimize the fluctuations in resources required from
one period to another over the life of the project.

In resource scheduling it is assumed that there is an upper limit on the resources

available and all activities are to be scheduled within the resource constraints.

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Thank you

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