2 Ch9 Project Management Overheads Student

Chapter 9
Project Management
Operations Management
Based on
Roberta Russell & Bernard W. Taylor, III
&
Smith (1993)
Copyright 2009 John Wiley & Sons, Inc.
Lecture Outline
Project Planning
Project Scheduling
Project Control
CPM
Microsoft Project
Project Crashing and Time-Cost
Trade-off
9-2
High
Low
Importance
DELAY
Leave on the to
do list
Prioritize by due
date and time
required
DO
Try to minimise
this quadrant
Review early,
identify risks
first, have a plan
DITCH
DELEGATE
Trust others to do Give this work to
this work
others to do
Low
High
Urgency
Delay, Delegate, Ditch, Do

Seven3 Habits of Highly Effective People, Steven S Covey
Project Management Process

Project
unique, one-time operational activity or effort
9-4
Project Management Process

(cont.)
9-5
Project Elements
Objective
Scope
Contract requirements
Schedules
Resources
Personnel
Control
Risk and problem analysis
Copyright 2009 John

Wiley & Sons, Inc.
9-6
Project Team and Project Manager

Project team
made up of individuals from various areas and
departments within a company
Matrix organization
a team structure with members from functional
areas, depending on skills required
Project manager
most important member of project team
9-7
Scope Statement and Work

Breakdown Structure
Scope statement
a document that provides an understanding,
justification, and expected result of a project
Statement of work
written description of objectives of a project
Work breakdown structure (WBS)

breaks down a project into components,
subcomponents, activities, and tasks
9-8
Work Breakdown Structure for Computer

Order Processing System Project
Copyright 2009 John
Wiley & Sons, Inc.
9-9
Responsibility Assignment Matrix

Organizational
Breakdown
Structure (OBS)
a chart that
shows which
organizational
units are
responsible for
work items
Responsibility
Assignment
Matrix (RAM)
shows who is
responsible for
work in a project
9-10
Global and Diversity Issues in

Project Management
In existing global business environment, project
teams are formed from different genders, cultures,
ethnicities, etc.
In global projects diversity among team members
can add an extra dimension to project planning
Cultural research and communication are important
elements in planning process
9-11
Project Scheduling
Steps
Techniques
Define activities
Sequence activities
Estimate time
Develop schedule
Copyright 2009 John

Wiley & Sons, Inc.
Gantt chart
CPM/PERT
Microsoft Project
9-12
Gantt Chart
Graph or bar chart with a bar for each project
activity that shows passage of time
Provides visual display of project schedule
Slack
amount of time an activity can be delayed without
delaying the project
9-13
Example of Gantt Chart

0
Month
4
10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials
Build house
Select paint
carpet
Select
Finish work
Month
9-14
BAR CHART WITH LOGIC

and PROGRESS INFORMATION
completion bar
logic link
activity bar
lag
START
TODAY
TIME
Project Control
Time management
Cost management
Quality management
Performance management
Earned Value Analysis
a standard procedure for numerically measuring a projects
progress, forecasting its completion date and cost and
measuring schedule and budget variation
Communication
Enterprise project management
9-16
CPM/PERT
Critical Path Method (CPM)
DuPont & Remington-Rand (1956)
Deterministic task times
Activity-on-node network construction
Project Evaluation and Review Technique (PERT)

US Navy, Booz, Allen & Hamilton
Multiple task time estimates; probabilistic
Activity-on-arrow network construction
9-17

All tasks are laid out in a network
Steps that must be done in sequence (i.e. conceptual design
before detailed engineering) are linked in a series
Elements that can be worked on concurrently are depicted
in parallel (for example, user manuals could be drafted
while special tooling is being produced)
Times are estimated for each task
The project network is analysed to identify the critical path
(the steps that constrain completion)
Progress is monitored against the schedule and status is
updated
Critical path can change, depending on actual performance
Problems are identified and corrective actions taken
32
Program Evaluation and Review Technique (PERT)
A version of CPM
A range of times assigned for each activity
Pessimistic, most likely, and optimistic
Options and varied scenarios provided
Network Analysis
Events precede and follow each activity
Activities that must be done in sequence are linked
serially
Activities that may be performed concurrently are
depicted in parallel
The critical path is determined by identifying the
longest path, in time required, through the network
33
AoA Network Diagram

Network diagram shows activities linked as paths.
Activities are shown as arrows
Each activity starts and ends with an Event
An event is the state of completion of a set of activities.
Earliest and latest times are calculated for events
Event Slack = ( Latest time -- Earliest time ) for event
Activity Float = amount of time an activity can be

delayed without affecting project time
= latest time end event -- earliest time start event -- duration
The critical path is the longest path in the network

there is no float on the critical path - any delay affects project
Task Dependencies and the

Critical Path
Sometimes task B cannot be started before task
A is completed
Other types of constraints calendar, lags, etc.
Critical path any slippage slips whole project
Helpful to know what tasks are on the critical
path
Useful to try to shorten the critical path
AoA Network Diagram

Network diagram shows activities linked as paths.
Activities are shown as arrows
Each activity starts and ends with an Event
An event is the state of completion of a set of activities.
Earliest and latest times are calculated for events
Event Slack = ( Latest time -- Earliest time ) for event
Activity Float = amount of time an activity can be

delayed without affecting project time
= latest time end event -- earliest time start event -- duration
The critical path is the longest path in the network

there is no float on the critical path - any delay affects project
High Level Critical Path Network - Breakfast

Circles are events; lines and arrows are activities
Not to
scale
Fill coffee pot 1
Percolate coffee 10
Do crossword 12
Read comics 5
Prepare cereal 2
4
Eat 13
Toast bread 2
Butter Toast 1
Non-critical activities
Critical activities
Commute
to work 25
Events
1 Begin preparing breakfast
4 Finish preparing / begin eating
6 Finish eating breakfast / begin commute
7 Finish commute
Draw basic network & bar chart

find critical path & project duration
A(5), B(4) & C(8) can start immediately

D(6) cant start till A & B both finish
E(5) cant start till B is finished
F(4) cant start till B & C both finish
G(6) cant start till D & E both finish
H(4) cant start till E & F both finish
Data for a Project

Activity
A
B
C
D
E
F
G
H
I
J
K
Duration Resource Cost

4
12
3
13
4
0
15
1
11
5
15
X 2400
Y 18000
X 1800
Y
-Y 6000
Y 15000
X
600
X 8250
X 1500
Y 7500
Dependency
A
A
A
A
B
C&F
D
D
E
H&J
AoA Network Diagram for the project

Event
Activity
A
4
F
0
D
13
Duration
J
5
I
11
Time analysis for the project

Event
Activity
0
0
A
4
3 16
18
F
0
4 16
18
D
13
4
4
Duration
8
13
J
5
17
17
I
11
18
7 18
33
33
Time analysis for the project

Event
Activity
0
0
A (0)
4
Duration
(2)
3 16
18
F (2) 16
4
18
0
(11)
(2)
D (0) 17
5 17
13
4
4
(0)
(0)
(5)
8
13
I (5)
11
J (5)
5
18
7 18
Critical path is A - D - H - K
33
33
Network on a Time Basis

B
3
F
C
0
16
17
D
8
6
6
5
J
8
28
13
31
initial assumption no resource constraints
16
18
33
K
critical path
10 12 14 16 18 20 22 24 26 28 30 32 34
Resource Scheduling
No Resource Constraints
Resource X
H
Resource Y
E
D
B
0
K
G
10 12 14 16 18 20 22 24 26 28 30 32 34
Resource Scheduling with Limits

Resource Limits
X = 1 max.Y = 2 max.
Resource X
Resource Y
D
E
K
B
10 12 14 16 18 20 22 24 26 28 30 32 34 36
Network on time-base with Limits

8
C
0
17
6
6
18
13 H
18
35
4
D
20
Max. X = 1
Max. Y = 2
20
8
29
8
K
33
10 12 14 16 18 20 22 24 26 28 30 32 34 36
Network on time-base with Limits

8
20
C
0
17
6
6
20
Max. X = 1
Max. Y = 2
Critical Path
A-E-B-G
18
13 H
18
35
8
29
8
K
33
10 12 14 16 18 20 22 24 26 28 30 32 34 36
Making a Project Budget

A4 C3
2400 1800
J5
1500
D 13
--
E4
6000
B 12
18000
H1
60
0
I 11
8250
K 15
7500
G 15
15000
Time
0
4
8
12
16
20
24
28
32
36
Dept 2400 1800 1200 300 600
1500 3000 3000 750
X
2400 1800 1200 300 2100 3000 3000 750
6000 6000 6000 6000 4000 4000 4000 3000
Dept
1000 2000 2000 2000 500
Y
6000 6000 6000 7000 6000 6000 6000 3500
Total
2400 7800 7200 6300 9100 9000 9000 6750 3500
Cum.
Total
2400 10200 17400 23700 32800 41800 50800 57550 61050
More on the Critical Path

If one of more activities on the critical path takes
longer than planned, the whole project schedule will
slip unless corrective action is taken
Remember:
The critical path is not the one with all the critical activities;
it only accounts for time (duration)
There can be more than one critical path if the
lengths of two or more paths are the same
The critical path can change as the project
progresses
Four types of Dependencies

Finish-start (FS)
Predecessor activity must finish before successor activity
can start
Start-stat (SS)
Predecessor activity must start before successor activity
can start
Finish-finish (FF)
Predecessor activity must finish before the successor
activity can finish
Start-finish (SF)
Predecessor activity must start before successor activity
can finish
Early Times ES & EF

These are the earliest possible times that an
activity can bet started and completed
Early Start Time
Depends on the completion time of immediate
predecessors
Calculated by summing the duration of each immediate
predecessor along the path to the activity
Multiple paths to the same activity then ES is the total
time of the longest path
Early Finish time
Late Times LS & LF

An activity not on the critical path can be delayed
without delaying the project
By how much?
The latest allowable times that the activity can start and
finish without delaying the completion of the project
Calculation is the reverse of calculating ES and EF
Late start time
Late finish time
Start with target completion date Terminal Node
Work backward
More than one path, the smallest value of LS among all its
immediate successors becomes the LF
Using Critical Path Analysis to

Make Schedule Trade-offs
Knowing the critical path helps you make schedule
trade-offs
Slack = LF ES - D
Total slack or total float is the amount of time an
activity may be delayed from its early start without
delaying the planned project finish date
Project representation
Comparing AON & AOA conventions
ACTIVITY ON THE NODE (AON)
ACTIVITY ON THE ARC (AOA)
LEF
T
RIGH
T
LEF
T
RIGH
T

LEF
T
RIGH
T
BAC
K
LEF
T
FRON
T
RIGH
T
BAC
K
LEF
T
FRON
T
RIGH
T

BAC
K
LEF
T
FRON
T
RIGH
T
DUMMY
END
END
RE-Draw basic network & bar chart

find critical path & project duration
as activity on node - AON
A(5), B(4) & C(8) can start immediately

D(6) cant start till A & B both finish
E(5) cant start till B is finished
F(4) cant start till B & C both finish
G(6) cant start till D & E both finish
H(4) cant start till E & F both finish
D
G
A
E
B
C
H
F
Visual Tools for Project

Management
GANTT charts:
Tasks (calendar time) vs. linear time, grouped
hierarchically, plus milestone events
Classically, not person-hours or people, nor
dependencies, nor critical path, nor progress
All have been added to augmented GANTT
charts
PERT/CPM Charts
PERT = Program Evaluation and Review
Technique
Graph with nodes (events), edges (tasks)
dramatizes dependency relationships
Task durations label edges
If add critical path emphasis in chart, called a
CPM chart
(Not linear in time harder to track progress)
Project Management
Improvement comes from introducing new products
new processes or new work methods, i.e. change.
Managers need to manage change.

Managing change is different from routine activities
Design and marketing are managed as projects
A Project is a set of activities with a start and end,
managed by a project manager and project team.
Project planning and Resource scheduling

Project budgeting and Project appraisal
Project contracts and Project control
Project Planning
This is the process of analysing the relationships between
activities in order to determine
The project duration and completion date

Due dates for start and end of each activity
Resource requirements and schedules
Activity costs and cost schedules
Project cost to appraise financial viability
A plan against which actual is compared
Project network
Establishes the LOGIC relationships
between activities
Provides a system for project analysis
Enables the calculation of project duration
Identifies the Critical Path through the project
Provides a basis for budgeting, resource
planning and project expediting
Assists communication & cost analysis
Data needed for Project Planning

Activity duration & cost data are needed at the planning
stage. These are estimates. Costs may be incurred at a
fixed rate/week or occur all at the end (Eg purchasing).
Duration depends on the resource allocated.
Resource requirement may be equipment or labour (one
person or more or part)
Eg. 3 weeks for 2 people, cost 500/week
Also the logical dependency between activities
(a set of predecessors for each activity)
Project Planning
Requires
List of activities
Duration of each activity
Resource requirements for each activity
Costs of each activity
Dependency between activities
Objectives
Project completion within budgeted time
Project completion within budgeted cost
Project completion within current resources
(it may not be possible to achieve all of these)
Project Activity Relationships

Sequential
Delay
Concurrent
A
B
delay
A
B
delay
parallel
time
Relationships between activities must be known in order

to determine overall project time
Sequential Product Development Process

Traditional Product Development
Technology development
Market research
Concept design
Detail design
Process planning
Buy machines
Arrange supplies
Market promotion
Start manufacturing
6 years
Project Based Organisations Concurrent Engineering

Project/process steering, performance review
Tech. dev.
Concurrent
Engineering
Mkt. res
C. design
Manufg Systems Eng. Kaizen/Kaikaku*
D. design
Proc. plan
Buy m/c
Supply
Mkg
Start mfg V1**
Start mfg V2**
-1
0
1
2
3 years
*Kaizen - continuous incremental improvement
Kaikaku - radical improvement and development
** V1 and V2 - product release Version 1 and Version 2.....
Steering Group / Committee
Purposes
to appoint Project Manager

to allocate funds, people & other resources
to provide overall strategic guidance
to champion the project (internal & external)
to resolve disputes between projects & functions
to monitor progress & performance
to exercise stop - pause - go control
to support the Project Manager & team
to evaluate effectiveness of implementation &
achievement of benefits expected
Steering Group / Committee

Composition
sufficient seniority for purpose

include areas contributing & affected
include the project manager (reporting)
not too many members
include customers representatives
RESOURCES -Time, Money, People

Personnel
number, skill requirements, availability
Money
amount, rate of spend
Equipment
number, type, availability
Materials
amount, storage, special requirements
Space
area, access, special requirements
RESOURCE AVAILABILITY
Period of availability
storable or non-storable
time is a non-storable resource
Level of availability
Permitted overload
Priorities of each type of resource
IMPORTANCE OF RESOURCE
AVAILABILITY
Setting of project objectives

Formulating plans
Assessing activity durations
Evaluating activity logic
Establishing programmes of work
Determining appropriate management
structure for control
PROJECT NETWORK
A
2
C
4
F
1
START
FINISH
B
2
D
1
E
2
Possible paths
BDF = 2+1+1= 4
BE = 2+2= 4
ACF = 2+4+1= 7 CRITICAL PATH
GANTT CHART
ACTIVITY 1 2
A 3 3
B 2 2
C
D
E
F
>>
1
3
2
>>
1
>>
2
>>
1 1
>> >>
>> >> >>
2
RESOURCE PLANNING
Resource PROFILE :- resource aggregation

schedule each activity at earliest possible date
assign estimated number of resources for the period
takes no account of resource scarcities
6
5
4
3
2
1
B
B
A
A
A
B
B
A
A
A
3
D
D
D
E
E
C
E
E
C
F
F
RESOURCE PLANNING
Resource SMOOTHING / LEVELLING

delay some activities to reduce peaks & troughs
avoid delaying project completion
maintain logical relationships
1
5
4
3
2
1
A
A
A
A
A
A
B
B
C
B
B
C
D
D
D
C
E
E
C
E
E
F
F
RESOURCE PLANNING
Resource ALLOCATION

allocate resources using priority rules
delay some activities, use up available float
may involve delaying project completion
1
3 A
2 A
1 A
2
A
A
A
3
B
B
C
4
B
B
C
5
E
E
C
6
E
E
C
7 8
D
D F
D F
RESOURCE PLANNING
Can make control difficult
reduces float
makes more paths critical
makes expediting difficult
Can delay the project

penalty payments
liquidated damages
loss of face / reputation
Project Scheduling
Scheduling custom-built products or special

projects presents some extra challenges:
Longer planning horizons
Expanded resource needs (for example, to include
design engineering)
Complex production and material planning and
scheduling
Different scheduling methods are used.
CPM / PERT
31

All tasks are laid out in a network
Steps that must be done in sequence (i.e. conceptual design
before detailed engineering) are linked in a series
Elements that can be worked on concurrently are depicted
in parallel (for example, user manuals could be drafted
while special tooling is being produced)
Times are estimated for each task
The project network is analysed to identify the critical path
(the steps that constrain completion)
Progress is monitored against the schedule and status is
updated
Critical path can change, depending on actual performance
Problems are identified and corrective actions taken
32
Earliest
start time
Duration
Earliest
finish time
Reference
number
Description
Resources
required
Latest
start time
Total
float
Latest
finish time
British Standard 6046 : Part 2 : 1981
FINISH
START
PRECEDENCE METHOD
NODE CONVENTION
How AOA and AON compare

6
J
5
8
13
(5)
13
7 18
13
J
13
18
Calculations
8
13
8 +5 = 13
J
13
18
8
18 5 = 13
13
J
13
18 8 5 = 5
18
ACTIVITIES & DELAYS

Activities take time and use resources
equipment
people
money
Activity duration is shown in the node
Delays take time but do not use resources

Delay duration is shown on the logic arrow
Network with Delays

ADD delay on forward pass
15
20
20
25
25
10
35
30
40
SUBTRACT delay on backward pass
6
6
Position delay to avoid confusion
COMPLEX RELATIONSHIPS
Start
to
Start
Finish
to
Finish
Start to Finish
LADDER ACTIVITIES
Dig trench
Delay
Delay
Lay pipe
Delay
Delay
Fill trench
WEEK 45
MILESTONE
External time constraint applied to an
activity or phase
Trade show, launch date, important visitor
Must finish by .......... Cant finish until......
Must start by ..........Cant start until.........
May force logic to be re-planned

May require rescheduling or expediting
NETWORK SUBJECTIVITY
Network analysis is:
logical
mathematical
precise
computers can do it
Networks are:
subjective
only humans can do it
computers can only help
SUBJECTIVITY
Logic
natural sequence assumptions
logic assumptions
resource assumptions
Timescale
timescale estimates
resource assumptions
logic sequence
finance assumptions
Charateristics of dysfunctional
behaviour
Lack of enthusiasm
Lack of respect
Lack of management commitment
Lack of challenging work
Lack of workable operating
procedures
Ill-defined statement of work
Duplication of effort
Poor communication skills
Inattentive listening
Lack of incentives
Undefined deliverables
Poor work environment
Lack of tools to do my work
Resource poor
Kliem, Ralph L. and Ludin, Irwn S. The People Side of Project Management. Gower 1992:15.
Phases versus stages chart

FEASIBILITY
P
H
A
S
E
S
FORMULATION
IMPLEMENTATION
INSTALLATION
SUSTAINING
STAGES GESTATION GROWTH INDEPENDENCE DECLINING DEATH
Kliem, Ralph L. and Ludin, Irwn S. The People Side of Project Management. Gower 1992:32.
Outline of a typical statement of work
INTRODUCTION
.BUGET
Project goal
Budget calculation techniques
Objective
Budget status collection
Scope
Budget status reporting
DELIVERABLES/PRODUCTS
.ROLES AND RESPONSIBILITIES
Software
Client
Hardware
Project manager/team
Training
Reporting relationships
Documentation
.REFERENCES
Support
Policies
CONSTRAINTS
Procedures
Schedule
Statutes
Budget
.ADDITIONAL CONSIDERATIONS
Environmental
.SIGNATURES OF AGREEMENT
Legal
SCHEDULE
Scheduling techniques
Scheduling tools
Status collection
Source: Kliem, Ralph L. and Ludin, Irwn S.
Status report
The People Side of Project Management. Gower 1992:40.
Financial Planning Conventions

ACCRUALS
Total Cost 10,000
40%
60%
Period 1 = 10,000 x 0.6 Period 2 = 10,000 x 0.4
Financial Planning - Expenditure Curve

Rate of
Expenditure
Time
Financial Planning - S Curve

Cumulative
Expenditure
Time
Financial Planning - Cost & Performance Monitoring

ETC
BTC
ACWD
BVWD
BVWS
Time
Network Example Questions
Summary
Job shops: detailed backward scheduling, dispatching systems to
sequence work; MRP schedules order need dates and start dates.
Detailed operation start and finish dates are determined and
adjusted in CRP.
Make to order and assemble to order environments: use of
forward scheduling to make promise dates to customers
Flow production: signalling systems such as Kanban and flow
control. With sufficient volume and consistent demand, mixedmodel scheduling and rate-based scheduling can be used
Custom-built products and special projects: CPM, PERT, or
other network planning and control technique
Bottleneck management: operations with constraining resources
A variety of environments and strategies: several different
methods.
36

2 Ch9 Project Management Overheads Student

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Chapter 9

Copyright 2009 John Wiley & Sons, Inc.

Copyright 2009 John Wiley & Sons, Inc.

Delay, Delegate, Ditch, Do

Project Management Process

Copyright 2009 John Wiley & Sons, Inc.

Project Management Process

Copyright 2009 John Wiley & Sons, Inc.

Copyright 2009 John

Project Team and Project Manager

Copyright 2009 John Wiley & Sons, Inc.

Scope Statement and Work

Work breakdown structure (WBS)

Copyright 2009 John Wiley & Sons, Inc.

Work Breakdown Structure for Computer

Responsibility Assignment Matrix

Global and Diversity Issues in

Copyright 2009 John Wiley & Sons, Inc.

Copyright 2009 John

Copyright 2009 John Wiley & Sons, Inc.

Example of Gantt Chart

BAR CHART WITH LOGIC

Copyright 2009 John Wiley & Sons, Inc.

Project Evaluation and Review Technique (PERT)

Copyright 2009 John Wiley & Sons, Inc.

Critical Path Method (CPM)

Program Evaluation and Review Technique (PERT)

AoA Network Diagram

Activity Float = amount of time an activity can be

The critical path is the longest path in the network

Task Dependencies and the

AoA Network Diagram

Activity Float = amount of time an activity can be

The critical path is the longest path in the network

High Level Critical Path Network - Breakfast

Fill coffee pot 1

Draw basic network & bar chart

A(5), B(4) & C(8) can start immediately

Data for a Project

Duration Resource Cost

AoA Network Diagram for the project

Time analysis for the project

Time analysis for the project

Network on a Time Basis

initial assumption no resource constraints

Resource Scheduling with Limits

Network on time-base with Limits

Network on time-base with Limits

Making a Project Budget

2400 7800 7200 6300 9100 9000 9000 6750 3500

2400 10200 17400 23700 32800 41800 50800 57550 61050

More on the Critical Path

Four types of Dependencies

Early Times ES & EF

Early Finish time

Late Times LS & LF

Using Critical Path Analysis to

ACTIVITY ON THE ARC (AOA)

ACTIVITY ON THE ARC (AOA)

ACTIVITY ON THE ARC (AOA)

ACTIVITY ON THE ARC (AOA)

ACTIVITY ON THE ARC (AOA)

ACTIVITY ON THE ARC (AOA)

ACTIVITY ON THE ARC (AOA)