17-1 Project Management

Operations Management

William J. Stevenson

8th edition

17-2 Project Management

CHAPTER
17

Project
Management

Operations Management, Eighth Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

17-3 Project Management

Projects

JAN FEB MAR APR MAY JUN

Build A

A Done

Build B

B Done

Build C

C Done
On time!
Build D

Ship

Unique, one-time operations designed to accomplish

a specific set of objectives in a limited time frame.
17-4 Project Management

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

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

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 Project Management

Project Management

What are the tools?

Work breakdown structure
Network diagram

Gantt charts

Risk management

17-8 Project Management

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

17-9 Project Management

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
17-10 Project Management

Project Manager

Responsible for:

Work Quality
Human Resources Time
Communications Costs

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Ethical Issues

Temptation to understate costs

Withhold information
Misleading status reports
Falsifying records
Comprising workers safety
Approving substandard work

17-12 Project Management

Project Life Cycle

Feasibility
Management

Planning
Concept
Execution

Termination
17-13 Project Management

Work Breakdown Structure

Figure 17.2

Project X

Level 1

Level 2

Level 3

Level 4

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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

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The Network Diagram

Network (precedence) diagram

Activity-on-arrow (AOA)
Activity-on-node (AON)
Activities
Events
17-16 Project Management

The Network Diagram (contd)

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

17-17 Project Management

Project Network Activity on Arrow

Figure 17.4
Order
AOA furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move
in
Interview
Hire and
train
3

17-18 Project Management

Project Network Activity on Node

Figure 17.4
Order
furniture
Locate Furniture
2 setup
facilities
AON
1 6
Move
Remodel
in

S 5 7

Hire and
Interview
train

3 4
17-19 Project Management

Network Conventions

a
b
c a

c
b

a c
a c

b Dummy
activity
b d

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Time Estimates

Deterministic
Time estimates that are fairly certain
Probabilistic
Estimates of times that allow for variation

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Example 1
Figure 17.5

6 weeks
Deterministic 4
time estimates er
Ord iture
Fur p

n 3 weeks
set

8 weeks 2 fur
nitu
u

Re m
te ode
ca
re

s
Lo ilitie 11 weeks
l Move
fac in
1 5 6
In 1 week
te in
rv tra
4 weeks ew
i
a nd
re
Hi 9 weeks

3
17-22 Project Management

Example 1 Solution

Critical Path

Path Length Slack

(weeks)
1-2-3-4-5-6 18 2
1-2-5-6 20 0
1-3-5-6 14 6

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Computing Algorithm

Network activities
ES: early start
EF: early finish
LS: late start
LF: late finish
Used to determine
Expected project duration
Slack time
Critical path

17-24 Project Management

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
17-25 Project Management

Probabilistic Estimates
Figure 17.8

to tm te tp

Activity Optimistic Most likely Pessimistic

start time time (mode) time

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Expected Time

te = to + 4tm +tp
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time

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Variance

2
2 = (tp to)
36

2 = variance
to = optimistic time
tp = pessimistic time
17-28 Project Management

Example 5

Optimistic Most likely Pessimistic

time time time

2-4-6
b

2- c
-4

3-
1-3

5
a
3-4-5 3-5-7 5-7-9
d e f
6
2- g

4-
3-

-
3 i
6

4-6-8
h

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Path Probabilities

Specified time Path mean

Z =
Path standard deviation

Z indicates how many standard deviations

of the path distribution the specified tine
is beyond the expected path duration.

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Example 6
17
Weeks
1.00
a-b-c
Weeks
10.0

d-e-f
Weeks
16.0

1.00
g-h-i
13.5 Weeks
17-31 Project Management

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
Multiple critical paths: find the sum of
crashing the least expensive activity on each
critical path

17-32 Project Management

Time-Cost Trade-Offs: Crashing

Figure 17.11

Total
cost

Expected indirect costs

Shorten

Cumulative CRASH
cost of
crashing
Shorten

Optimum

17-33 Project Management

Example 7

10
6 b
a
2
f
5

9
c

4
d
17-34 Project Management

Advantages of PERT

Forces managers to organize

Provides graphic display of activities
Identifies
4
Critical activities
2
Slack activities
1 5 6

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Limitations of PERT

Important activities may be omitted

Precedence relationships may not be correct
Estimates may include 4

a fudge factor 2

May focus solely

on critical path 1 5 6

142 weeks

17-36 Project Management

Technology for Managing Projects

Computer aided design (CAD)

Groupware (Lotus Notes)
Project management software
CA Super Project
Harvard Total Manager

MS Project

Sure Track Project Manager

Time Line
17-37 Project Management

Advantages of PM Software

Imposes a methodology
Provides logical planning structure
Enhances team communication
Flag constraint violations
Automatic report formats
Multiple levels of reports
Enables what-if scenarios
Generates various chart types

17-38 Project Management

Project Risk Management

Risk: occurrence of events that have

undesirable consequences
Delays
Increased costs
Inability to meet specifications
Project termination

17-39 Project Management

Risk Management

Identify potential risks

Analyze and assess risks
Work to minimize occurrence of risk
Establish contingency plans
17-40 Project Management

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

17-41 Project Management

CHAPTER
17
Additional PowerPoint slides
contributed by
Geoff Willis,
University of Central Oklahoma.

17-42 Project Management

Project Crashing

Crashing a project involves paying more

money to complete a project more quickly.
Since the critical path determines the length of
a project, it makes sense to reduce the length
of activities on the critical path.
CP activities should be reduced until the
project is reduced to the desired length or you
are paying more per day than you save.
If you have multiple CPs, they should be
shortened simultaneously.