Stevenson

17

Project
Management
 Learning Objectives
 Discuss the behavioral aspects of projects
in terms of project personnel and the
project manager.
 Discuss the nature and importance of a
work breakdown structure in project
management.
 Give a general description of PERT/CPM
techniques.
 Construct simple network diagrams.

17-2
 Learning Objectives
 List the kinds of information that a PERT or
CPM analysis can provide.
 Activity Scheduling
 Analyze networks with deterministic times.
 Analyze networks with probabilistic times.
 Describe activity “crashing.”

17-3
 Projects
JAN FEB MAR APR MAY JUN
Build A

A Done

Build B

B Done

Build C

C Done

Build D
On time!
Ship

Unique, one-time operations designed to

accomplish a specific set of objectives in a
limited time frame.

17-4
 Project Management
 How is it different?
 Limited time frame
 Narrow focus, specific objectives
 Less bureaucratic
 Why is it used?
 Special needs
 Pressures for new or improves products or
services

17-5
 Project Management
 What are the Key Metrics
 Time
 Cost
 Performance objectives
 What are the Key Success Factors?
 Top-down commitment
 Having a capable project manager
 Having time to plan
 Careful tracking and control
 Good communications

17-6
 Project Management
 What are the Major Administrative Issues?
 Executive responsibilities
 Project selection
 Project manager selection
 Organizational structure
 Organizational alternatives
 Manage within functional unit
 Assign a coordinator
 Use a matrix organization with a project leader

17-7
 Key Decisions
 Deciding which projects to implement
 Selecting a project manager
 Selecting a project team
 Planning and designing the project
 Managing and controlling project
resources
 Deciding if and when a project should be
terminated
17-8
 Project Manager
Responsible for:

Work Quality
Human Resources Time
Communications Costs

17-9
Project Life Cycle

17-10
 Project Management
 What are the basic tools?
 Gantt charts
 Work breakdown structure
 Network diagram
 Risk management

17-11
 Gantt Chart
 A popular tool for planning and scheduling simple
projects, and for initial planning for more complex
projects
 Graph or bar chart
 Bars represent the time for each task
 Bars also indicate status of tasks
 Provides visual display of project schedule
 Closely associated with PERT
 Slack
 amount of time an activity can be delayed without delaying
the project

17-12
17-13
 Planning and Scheduling

Gantt Chart MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Locate new facilities

Interview staff

Hire and train staff

Select and order

furniture

Remodel and install

phones

Move in/startup

17-14
 Precedence Relationship
Activity Activity Activity
Activity Legend Predecessor Duration
Design house and obtain financing 1 - 3
Lay foundation 2 1 2
Order and receive material 3 1 1
Build house 4 2,3 3
Select Paint 5 2,3 1
Select Carpet 6 5 1
Finish work 7 4,6 1

17-15
 Example of Gantt Chart
Month
0 | 2 | 4 | 6 | 8 | 10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials

Build house

Select paint

Select carpet

Finish work

1 3 5 7 9
Month
9-16
 Work Breakdown Structure

Project
Project X
X

Level 1

Level 2

Level 3

Level 4

17-17
Work Breakdown Structure

17-18
 PERT and CPM
PERT: Program Evaluation and
Review Technique
CPM: Critical Path Method

 Graphically displays project activities

 Estimates how long the project will take
 Indicates most critical activities
 Show where delays will not affect project

17-19
 The Network Diagram
 Network (precedence) diagram – diagram of
project activities that shows sequential
relationships by the use of arrows and nodes.
 Activity-on-arrow (AOA) – a network diagram
convention in which arrows designate activities.
 Activity-on-node (AON) – a network diagram
convention in which nodes designate activities.
 Activities – steps in the project that consume
resources and/or time.
 Events – the starting and finishing of activities,
designated by nodes in the AOA convention. 17-20
The Network Diagram (cont’d)
 Path
 Sequence of activities that leads from the starting
node to the finishing node
 Critical path
 The longest path; determines expected project
duration
 Critical activities
 Activities on the critical path
 Slack
 Allowable slippage for path; the difference the
length of path and the length of critical path

17-21
Project Network – Activity on
Arrow
Order
AOA furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move
in
Interview
Hire and
train
3

17-22
Project Network – Activity on
Node
Order
furniture
Locate Furniture
2 setup
facilities
AON
1 6
Move
Remodel
in

S 5 7 E

Hire and
Interview
train

3 4

17-23
 Precedence Relationship
Activity Activity Activity
Activity Legend Predecessor Duration
Design house and obtain financing 1 - 3
Lay foundation 2 1 2
Order and receive material 3 1 1
Build house 4 2,3 3
Select Paint 5 2,3 1
Select Carpet 6 5 1
Finish work 7 4,6 1

17-24
 AON Network Diagram for
House Building Project
Lay Build
foundation house
Activity
2 4 Number
Activity
2 3 Time

Star 1 7 END
t 3 1
Finish work
Design 3 5 6
house and
1 1 1
obtain
financing Order &receive Select Select
materials paint carpet

25
 Critical Path
Activity Network (Scheduling) Diagrams are used to determine Critical Path.

2 4
2 3

Star 1 7 END
t 3 1
3 5 6
1 1 1

A: 1-2-4-7
3+2+3 + 1 = 9 months  Critical path
B: 1-2-5-6-7
3+2+1 + 1 + 1 = 8 months  Longest path
C: 1-3-4-7
3+1+3 + 1 = 8 months through a network
D: 1-3-5-6-7
3+1+1 + 1 + 1 = 7 months
 Minimum project
completion time

26
 Activity Start Times
Starts at 5
months
2 4
Starts at 8 months
2 3
Finishes at 9
Starts at 0 months
month
1 7
Start
Finish
3 1

3 5 6

1 1 1

Starts at 3 Starts at 6
months months

Why does Activity six start at 6 months?

Because Activity 5 must be completed
before activity 6, and activity 2 must be
completed before activity 5.
27
Node Configuration
Activity Earliest Earliest
number start (ES) finish (EF)

1 0 3

3 0 3

Activity Latest Latest

duration start (LS) finish (LF)

28
 Activity Scheduling

 Earliest start time (ES)

 earliest time an activity can start
 ES = maximum EF of immediate predecessors

 Forward pass
 starts at beginning of CPM/PERT network to determine
earliest activity times

 Earliest finish time (EF)

 earliest time an activity can finish
 earliest start time plus activity duration
 EF= ES + t

29
Activity Scheduling

17-30
 Earliest Activity Start and Finish Times

Lay
foundation Build
house
2 3 5
4 5 8 Finish
2
3 work

1 0 3 7 8 9
Start Finish
3 1
Design
house and 6 6 7
obtain 3 3 4
1
financing 1 5 5 6
Select
Order and 1 carpet
receive
materials Select
paint

31
 Activity Scheduling
 Latest start time (LS)
 Latest time an activity can start without delaying critical
path time
 LS= LF - t

 Latest finish time (LF)

 latest time an activity can be completed without delaying
critical path time
 LF = minimum LS of immediate predecessors

 Backward pass
 Determines latest activity times by starting at the end of
CPM/PERT network and working forward

32
 Latest Activity Start and Finish Times
Lay
foundation Build
house
2 3 5
4 5 8 Finish
2 3 5
3 work
5 8

1 0 3 7 8 9
Start Finish
3 0 3 1 8 9
Design
house and 6 6 7
obtain 3 3 4
1 7 8
financing 1 4 5 5 5 6
Select
Order and 1 6 7 carpet
receive
materials Select
paint

Question: Why is Activity 3’s LF 5?

33
 Activity Slack
Activity LS ES LF EF Slack
*1 0 0 3 3 0
*2 3 3 5 5 0
3 4 3 5 4 1
*4 5 5 8 8 0
5 6 5 7 6 1
6 7 6 8 7 1
*7 8 8 9 9 0
* Critical Path

Slack = LS – ES
or
Slack = LF – EF

Critical Path Items contain zero slack

34
 Time Estimates
 Deterministic
 Time estimates that are fairly certain

 Probabilistic
 Estimates of times that allow for variation

17-35
 Example 1
6 weeks
Deterministic 4
time estimates rd er e
O i tu r

Fu r p
n 3 weeks
fu r

set
8 weeks 2

n i tu
u
Rem
ate s od e

re
c
L o i l i ti e 11 weeks
l Move
fac in
1 5 6
In 1 week
te ain
rv r
i dt
4 weeks ew an
re
Hi 9 weeks

17-36
Example 1 Solution: Deterministic
Critical Path

P a th L e n g th S la c k
(w e e k s )
1 -2 -3 -4 -5 -6 18 2
1 -2 -5 -6 20 0
1 -3 -5 -6 14 6

17-37
 Probabilistic Time Estimates
 Optimistic time
 Time required under optimal conditions
 Pessimistic time
 Time required under worst conditions
 Most likely time
 Most probable length of time that will be
required

17-38
 Expected Time

te = t o + 4t m +t p
6
te = expected time (“t” in example)
to = optimistic time (“a” in example)
tm = most likely time (“m” in example)
tp = pessimistic time (“b” in example)

17-39
 Variance

(t
 p o– t ) 2

36

= variance
to = optimistic time
tp = pessimistic time

17-40
 Probabilistic Time Estimates

• Beta distribution
• probability distribution traditionally used in CPM/PERT

41
 Activity Duration Estimates

Optimistic Most Likley Pessimistic

Predecessor
Activity Number Activity to or a tm or m tp or b
1 - 6 8 10

2 - 3 6 9

3 - 1 3 5

4 1 2 4 12

5 2 2 3 4

6 3 3 4 5

7 3 2 2 2

8 1, 5, 6 3 7 11

9 1, 5, 6 2 4 6

10 4 1 4 7

11 8, 9, 7 1 10 13
Copyright 2011 John Wiley & Sons, Inc.
9-42
 Project with Probabilistic Time
Estimates
Equipment installation Equipment testing and
modification

1 4 Activity
System training Final debugging
6,8,10 2,4,12 a, m, b

System development
10
8
Manual testing 1,4,7
2 3,7,11
Start Finish
3,6,9
5 11

2,3,4 9
Position 1,10,13
recruiting
2,4,6
Job Training
System
3 changeover
6 System
1,3,5 testing
3,4,5

Orientation

7
2,2,2

43
 Activity Time Estimates

TIME ESTIMATES (WKS)MEAN TIME VARIANCE

ACTIVITY a m b t б2

1 6 8 10 8 0.44
2 3 6 9 6 1.00
3 1 3 5 3 0.44
4 2 4 12 5 2.78
5 2 3 4 3 0.11
6 3 4 5 4 0.11
7 2 2 2 2 0.00
8 3 7 11 7 1.78
9 2 4 6 4 0.44
10 1 4 7 4 1.00
11 1 10 13 9 4.00

44
Activity Early, Late Times & Slack

45
 Earliest, Latest, and Slack

Critical Path 2-5-8-11; Project Duration = 6+3+7+9 = 25

46
 Total Project Variance

2 = б22 + б52 + б82 + б112

2 = 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks

Key point to remember – to calculate project variance, we need

to add the variances of each activities on the critical path.

47
 Probabilistic Network Analysis

Determine probability that project is

completed within specified time
x-
Z= 
where
 = tp = project mean time
 = project standard deviation
x = proposed project time
Z = number of standard deviations
that x is from the mean

48
 Previous Example

What is probability that project is completed within 30 weeks?

Length
of
P(x  30 weeks)
x- Critical
 2
= 6.89 weeks Z =  Path
 = 6.89 30 - 25
= 2.62
 = 2.62 weeks
 = 25 x = 30 Time (weeks)
= 1.91

From the Standard Normal Distribution Table, a z score

of 1.91 corresponds to a probability 0.9719

49
 Same Example

What is probability that project is completed within 22 weeks?

P(x  22 weeks) 0.3729
= 0.1271 x-
 2
= 6.89 weeks Z = 
 = 6.89 22 - 25
= 2.62
 = 2.62 weeks
= -1.14
x = 22  = 25 Time (weeks)

From the Standard Normal Distribution Table, a z score

of -1.14 corresponds to a probability of 0.1271

50
 Time-cost Trade-offs: Crashing
 Crash – shortening activity duration
 Procedure for crashing
 Crash the project one period at a time
 Only an activity on the critical path
 Crash the least expensive activity on the critical
path
 After each crash, recheck the critical path(s) and
all paths
 Multiple critical paths: find the sum of crashing
the least expensive activity on each critical path
17-51
Time-Cost Trade-Offs: Crashing

17-52
Project Crashing Example

10
6 b
a
2
f
5

9
c

e
4
d
17-53
 Project Crashing Solution
1. Find the critical path:

2. Rank the critical path activities in order of

lowest crashing cost, and determine the
number of days that can be crashed
Normal time –
crash time

17-54
 Project Crashing Solution
Crash the project, one day at a time. After
each crash, re-check the critical path and all
other paths.
a. Crash activity c one day for $300. Length of
critical path in now 19 days.
b. Activity c cannot be crashed any more (only
had 1 day available for crashing).
c. Length of path c-d-e-f is 19. Length of path a-b-
f is 18.
d. c-d-e-f is still critical path.

17-55
 Available Crash
Activity Cost
Days
C 300 0
E 600 2
D 700 3
F 800 1

17-56
 Project Crashing Solution
Crash the project, one day at a time. After
each crash, re-check the critical path and all
other paths.
a. Crash activity e one day for $600.
b. Path c-d-e-f is 18 days. Path a-b-f is
unchanged at 18 days.
c. Both paths are now critical. We must shorten
both paths for further improvement

17-57
 Available Crash
Activity Cost
Days
A - -
C 300 0
B 500 2
E 600 1
D 700 3
F 800 1

17-58
 Project Crashing Solution
4. Remaining activities for crashing and costs:

5. Analysis:
a) Should we crash f? f is on both paths, and
crashing cost is $800 per day.
b) Alternatively, we may crash b ($500/day) and e
($600/day) to reduce 1 day. But the combined
cost is $1100.
17-59
 Project Crashing Solution
6. Crash f. Project duration is now 17 days.
7. Both paths are at 17 days – both critical

17-60
 Available Crash
Activity Cost
Days
A - -
C 300 0
B 500 2
E 600 1
D 700 3
F 800 0

17-61
 Project Crashing Solution
6. Analysis: can we crash any more activities?
Cost is crash b is $500 and cost to crash e
is $600, added together ($1100) exceeds
the project daily cost of $1000.
7. Conclusion: no more crashing is feasible.
8. Summary:

17-62
 Advantages of PERT

 Forces managers to organize

 Provides graphic display of activities
 Identifies
4
 Critical activities 2

 Slack activities 1 5 6

17-63
 Limitations of PERT

 Important activities may be omitted

 Precedence relationships may not be
correct
4
 Estimates may include 2
a fudge factor
 May focus solely 1 5 6

on critical path 142 weeks

17-64
 Project Risk Management

 Risk: occurrence of events that have

undesirable consequences
 Delays
 Increased costs
 Inability to meet specifications
 Project termination

17-65
 Risk Management

 Identify potential risks

 Analyze and assess risks
 Work to minimize occurrence of risk
 Establish contingency plans

17-66
 Summary
 Projects are a unique set of activities
 Projects go through life cycles
 PERT and CPM are two common
techniques
 Network diagrams
 Project management software available

17-67