Project Management PDF

16/09/2014
3 Project Management
PowerPoint presentation to accompany

Heizer and Render
Operations Management, 10e
Principles of Operations Management, 8e
PowerPoint slides by Jeff Heyl
© 2011 Pearson Education, Inc. publishing as Prentice Hall 3-1
Outline
Global Company Profile: Bechtel
Group
The Importance of Project
Management
Project Planning
The Project Manager
Work Breakdown Structure
Project Scheduling
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Outline - Continued
Project Controlling
Project Management Techniques:
PERT and CPM
The Framework of PERT and CPM
Network Diagrams and Approaches
Activity-on-Node Example
Activity-on-Arrow Example
Outline - Continued
Determining the Project Schedule
Forward Pass
Backward Pass
Calculating Slack Time and
Identifying the Critical Path(s)
Variability in Activity Times
Three Time Estimates in PERT
Probability of Project Completion
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Outline - Continued
Cost-Time Trade-Offs and Project
Crashing
A Critique of PERT and CPM
Using Microsoft Project to Manage
Projects
Learning Objectives
When you complete this chapter you
should be able to:
1. Use a Gantt chart for scheduling
2. Draw AOA and AON networks
3. Complete forward and backward
passes for a project
4. Determine a critical path
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Learning Objectives
When you complete this chapter you
should be able to:
5. Calculate the variance of
activity times
6. Crash a project
Bechtel Projects
Building 26 massive distribution centers in just
two years for the internet company Webvan
Group ($1 billion)
Constructing 30 high-security data centers
worldwide for Equinix, Inc. ($1.2 billion)
Building and running a rail line between London
and the Channel Tunnel ($4.6 billion)
Developing an oil pipeline from the Caspian Sea
region to Russia ($850 million)
Expanding the Dubai Airport in the UAE ($600
million), and the Miami Airport in Florida ($2
billion)
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Bechtel Projects
Building liquid natural gas plants in Yemen $2
billion) and in Trinidad, West Indies ($1 billion)
Building a new subway for Athens, Greece ($2.6
billion)
Constructing a natural gas pipeline in Thailand
($700 million)
Building 30 plants for iMotors.com, a company
that sells refurbished autos online ($300 million)
Building a highway to link the north and south of
Croatia ($303 million)
Strategic Importance of
Project Management
Bechtel Project Management:
Iraq war aftermath
International workforce, construction
professionals, cooks, medical personnel,
security
Millions of tons of supplies
Hard Rock Cafe Rockfest Project:
100,000 + fans
planning began 9 months in advance
© 2011 Pearson Education, Inc. publishing as Prentice Hall 3 - 10
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Project Characteristics
Single unit
Many related activities
Difficult production planning and
inventory control
General purpose equipment
High labor skills
Examples of Projects
Building Construction
Research Project
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Management of Projects
1. Planning - goal setting, defining the
project, team organization
2. Scheduling - relates people, money,
and supplies to specific activities
and activities to each other
3. Controlling - monitors resources,
costs, quality, and budgets; revises
plans and shifts resources to meet
time and cost demands
Project Management
Activities
Planning
Objectives Scheduling
Resources Project activities
Work break-down Start & end times
structure Network
Organization
Controlling
Monitor, compare, revise, action
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Project Planning,
Scheduling, and Controlling
Figure 3.1
Before Start of project During
project Timeline project
Project Planning,
Figure 3.1
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Project Planning,
Figure 3.1
Project Planning,
Figure 3.1
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Project Time/cost
Planning,
Budgets
estimates

Engineering diagrams
Cash flow charts
Material availability details
Budgets
Delayed activities report
Slack activities report
CPM/PERT
Gantt charts
Milestone charts
Cash flow schedules
Figure 3.1
Project Planning
Establishing objectives
Defining project
Creating work
breakdown structure
Determining
resources
Forming organization
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Project Organization
Often temporary structure
Uses specialists from entire company
Headed by project manager
Coordinates activities
Monitors schedule
and costs
Permanent
structure called
‘matrix organization’
Project Organization
Works Best When
1. Work can be defined with a specific
goal and deadline
2. The job is unique or somewhat
unfamiliar to the existing organization
3. The work contains complex
interrelated tasks requiring specialized
skills
4. The project is temporary but critical to
the organization
5. The project cuts across organizational
lines
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A Sample Project
Organization
President
Human Quality
Resources Marketing Finance Design Production
Mgt
Project 1 Project
Manager
Mechanical Test
Technician
Engineer Engineer
Project 2 Project
Manager
Electrical Computer
Technician
Engineer Engineer
Figure 3.2
Matrix Organization
Marketing Operations Engineering Finance
Project 1
Project 2
Project 3
Project 4
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The Role of
the Project Manager
Highly visible
Responsible for making sure that:
1. All necessary activities are finished in order

and on time
2. The project comes in within budget
3. The project meets quality goals
4. The people assigned to the project receive
motivation, direction, and information
The Role of
the Project Manager
Highly visible
Responsible for making sure that:
Project managers should be:
Goodare
1. All necessary activities coaches
finished in order
and on time Good communicators
2. The project comesAble
in within budget activities
to organize
3. The project meets from a variety
quality goals of disciplines
4. The people assigned to the project receive
motivation, direction, and information
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Ethical Issues
Project managers face many ethical
decisions on a daily basis
The Project Management Institute has
established an ethical code to deal with
problems such as:
1. Offers of gifts from contractors
2. Pressure to alter status reports to mask delays
3. False reports for charges of time and expenses
4. Pressure to compromise quality to meet
schedules
Level
1. Project
2. Major tasks in the project
3. Subtasks in the major tasks
4. Activities (or work packages)
to be completed
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Develop Windows 7
Level 1 1.0
Operating System
Software Project System

Level 2 1.1 1.2 1.3
Design Management Testing
Develop Module
Level 3 1.1.1 Planning 1.2.1 1.3.1
GUIs Testing
Ensure Compatibility Cost/Schedule Defect

with Earlier Versions 1.1.2 Management 1.2.2 Testing 1.3.2
Compatible with
Level 4 1.1.2.1
Windows ME
(Work packages)
Compatible with
1.1.2.2
Windows Vista
Compatible with Figure 3.3

Windows XP 1.1.2.3
Project Scheduling
Identifying precedence
relationships
Sequencing activities
Determining activity
times & costs
Estimating material &
worker requirements
Determining critical
activities
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Purposes of Project
Scheduling
1. Shows the relationship of each activity to
others and to the whole project
2. Identifies the precedence relationships
among activities
3. Encourages the setting of realistic time
and cost estimates for each activity
4. Helps make better use of people, money,
and material resources by identifying
critical bottlenecks in the project
Scheduling Techniques
1. Ensure that all activities are planned
for
2. Their order of performance is
accounted for
3. The activity time estimates are
recorded
4. The overall project time is developed
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Project Management
Techniques
Gantt chart
Critical Path Method
(CPM)
Program Evaluation
and Review
Technique (PERT)
A Simple Gantt Chart
Time
J F M A M J J A S
Design
Prototype
Test
Revise
Production
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Service For a Delta Jet

Deplaning
Passengers
Baggage claim
Baggage Container offload
Pumping
Fueling
Engine injection water
Cargo and mail Container offload
Main cabin door
Galley servicing
Aft cabin door
Lavatory servicing Aft, center, forward
Drinking water Loading
Cabin cleaning First-class section
Economy section
Cargo and mail Container/bulk loading
Flight services Galley/cabin check
Receive passengers
Operating crew Aircraft check
Baggage Loading
Passengers Boarding
0 10 20 30 40
Time, Minutes
Figure 3.4
Project Control Reports

Detailed cost breakdowns for each task
Total program labor curves
Cost distribution tables
Functional cost and hour summaries
Raw materials and expenditure forecasts
Variance reports
Time analysis reports
Work status reports
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PERT and CPM

Network techniques
Developed in 1950’s
CPM by DuPont for chemical plants (1957)
PERT by Booz, Allen & Hamilton with the
U.S. Navy, for Polaris missile (1958)
Consider precedence relationships and
interdependencies
Each uses a different estimate of
activity times
Six Steps PERT & CPM

1. Define the project and prepare the
work breakdown structure
2. Develop relationships among the
activities - decide which activities
must precede and which must
follow others
3. Draw the network connecting all of
the activities
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Six Steps PERT & CPM

4. Assign time and/or cost estimates
to each activity
5. Compute the longest time path
through the network – this is called
the critical path
6. Use the network to help plan,
schedule, monitor, and control the
project
Questions PERT & CPM

Can Answer
1. When will the entire project be
completed?
2. What are the critical activities or tasks in
the project?
3. Which are the noncritical activities?
4. What is the probability the project will be
completed by a specific date?
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Questions PERT & CPM

Can Answer
5. Is the project on schedule, behind
schedule, or ahead of schedule?
6. Is the money spent equal to, less than, or
greater than the budget?
7. Are there enough resources available to
finish the project on time?
8. If the project must be finished in a shorter
time, what is the way to accomplish this
at least cost?
A Comparison of AON and

AOA Network Conventions
Activity on Activity Activity on
Node (AON) Meaning Arrow (AOA)
A comes before
(a) A B C B, which comes
before C. A B C
A A
A and B must both
(b) C be completed
before C can start. C
B B
B
B and C cannot
(c) A begin until A is B
completed. A
C C
© 2011 Pearson Education, Inc. publishing as Prentice Hall Figure 3.5 3 - 42
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C and D cannot
A C begin until both A C
(d) A and B are
completed.
B D B D
C cannot begin
until both A and B
A C are completed; D A C
(e) cannot begin until Dummy activity
B is completed. A
B D dummy activity is
introduced in AOA.
B D

B and C cannot
begin until A is
completed. D
A B D cannot begin A B D
until both B and
(f) C are completed. Dummy
A dummy activity
C
C
activity is again
introduced in
AOA.
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AON Example
Milwaukee Paper Manufacturing's
Activities and Predecessors
Immediate
Activity Description Predecessors
A Build internal components —
B Modify roof and floor —
C Construct collection stack A
D Pour concrete and install frame A, B
E Build high-temperature burner C
F Install pollution control system C
G Install air pollution device D, E
H Inspect and test F, G
Table 3.1
AON Network for

Milwaukee Paper
Activity A
A
(Build Internal Components)
Start
Activity B
Start B (Modify Roof and Floor)
Activity
Figure 3.6
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AON Network for

Milwaukee Paper
Activity A Precedes Activity C
A C
Start
B D
Activities A and B
Precede Activity D Figure 3.7
AON Network for

Milwaukee Paper
F
A C
E
Start H
B D G
Arrows Show Precedence

Relationships Figure 3.8
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AOA Network for

Milwaukee Paper
C
2 4
(Construct
Stack)
H
1 Dummy 6 7
Activity (Inspect/
Test)
D
3 5
(Pour
Concrete/
Install Frame) Figure 3.9
Determining the Project

Schedule
Perform a Critical Path Analysis
The critical path is the longest path
through the network
The critical path is the shortest time in
which the project can be completed
Any delay in critical path activities
delays the project
Critical path activities have no slack
time
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Schedule
Activity Description Time (weeks)
A Build internal components 2
B Modify roof and floor 3
C Construct collection stack 2
D Pour concrete and install frame 4
E Build high-temperature burner 4
F Install pollution control system 3
G Install air pollution device 5
H Inspect and test 2
Total Time (weeks) 25
Table 3.2

Schedule
Earliest start (ES) = earliest time at which an activity can
Activity Descriptionstart, assuming all predecessors Time (weeks)
have
A Build internal components
been completed 2
EarliestBfinish (EF)
Modify roof and
= earliest floor
time at which an activity can3
C be finished
Construct collection stack 2
LatestD start (LS)
Pour=concrete
latest timeandat install
which frame
an activity can4
E start so as to not delay
Build high-temperature burnerthe completion
4
F time of the entire project
Install pollution control system 3
LatestGfinish (LF) = latest
Install time bydevice
air pollution which an activity has 5 to
be finished so as to not delay the
H Inspect and test 2
completion time of the entire project
Total Time (weeks) 25
Table 3.2
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Schedule
Activity Name
or Symbol
A Earliest
Earliest ES EF
Start Finish
Latest LS LF Latest
Start 2 Finish
Figure 3.10 Activity Duration

Forward Pass
Begin at starting event and work forward
Earliest Start Time Rule:
If an activity has only a single immediate

predecessor, its ES equals the EF of the
predecessor
If an activity has multiple immediate
predecessors, its ES is the maximum of
all the EF values of its predecessors
ES = Max {EF of all immediate predecessors}
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Forward Pass
Begin at starting event and work forward
Earliest Finish Time Rule:
The earliest finish time (EF) of an activity

is the sum of its earliest start time (ES)
and its activity time
EF = ES + Activity time
ES/EF Network for

Milwaukee Paper
ES EF = ES + Activity time
Start
0 0
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ES/EF Network for

Milwaukee Paper
EF of A =
ES ES of A + 2
of A
A
Start 0 2
0 0
ES/EF Network for

Milwaukee Paper
A
0 2
2 EF of B =
ES ES of B + 3
0
Start
0 of B
B
0 0 3
3
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ES/EF Network for

Milwaukee Paper
A C
0 2 2 4
2 2
Start
0 0
B
0 3
ES/EF Network for

Milwaukee Paper
A C
0 2 2 4
2 2
Start
0 0
= Max (2, 3) D
0
3 7
B
0 3
3
4
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ES/EF Network for

Milwaukee Paper
A C
0 2 2 4
2 2
Start
0 0
B D
0 3 3 7
3 4
ES/EF Network for

Milwaukee Paper
A C F
0 2 2 4 4 7
2 2 3
Start E H
0 0 4 8 13 15
0 4 2
B D G
0 3 3 7 8 13
3 4 5
Figure 3.11
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Backward Pass
Begin with the last event and work backwards
Latest Finish Time Rule:
If an activity is an immediate predecessor

for just a single activity, its LF equals the
LS of the activity that immediately follows it
If an activity is an immediate predecessor
to more than one activity, its LF is the
minimum of all LS values of all activities
that immediately follow it
LF = Min {LS of all immediate following activities}
Backward Pass
Begin with the last event and work backwards
Latest Start Time Rule:
The latest start time (LS) of an activity is

the difference of its latest finish time (LF)
and its activity time
LS = LF – Activity time
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LS/LF Times for

Milwaukee Paper
A C F
0 2 2 4 4 7
2 2 3
Start E H
0 0 4 8 13 15
13 15
0 4 2
B LS = LF
D – Activity time
G
0 3 3 7 8 13
3 4 5 LF = EF
of Project
LS/LF Times for

Milwaukee Paper
A C F
0 2 2 4 4 7
10 13
2 2 3
Start E H
0 0
LF =4 Min(LS
8 of 13 15
following activity) 13 15
0 4 2
B D G
0 3 3 7 8 13
3 4 5
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LS/LF Times for

LF = Min(4, 10)
Milwaukee Paper
A C F
0 2 2 4 4 7
2 4 10 13
2 2 3
Start E H
0 0 4 8 13 15
4 8 13 15
0 4 2
B D G
0 3 3 7 8 13
8 13
3 4 5
LS/LF Times for

Milwaukee Paper
A C F
0 2 2 4 4 7
0 2 2 4 10 13
2 2 3
Start E H
0 0 4 8 13 15
0 0 4 8 13 15
0 4 2
B D G
0 3 3 7 8 13
1 4 4 8 8 13
3 4 5
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Computing Slack Time

After computing the ES, EF, LS, and LF times
for all activities, compute the slack or free
time for each activity
Slack is the length of time an activity can

be delayed without delaying the entire
project
Slack = LS – ES or Slack = LF – EF
Computing Slack Time

Earliest Earliest Latest Latest On
Start Finish Start Finish Slack Critical
Activity ES EF LS LF LS – ES Path
A 0 2 0 2 0 Yes
B 0 3 1 4 1 No
C 2 4 2 4 0 Yes
D 3 7 4 8 1 No
E 4 8 4 8 0 Yes
F 4 7 10 13 6 No
G 8 13 8 13 0 Yes
H 13 15 13 15 0 Yes
Table 3.3
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Critical Path for

Milwaukee Paper
A C F
0 2 2 4 4 7
0 2 2 4 10 13
2 2 3
Start E H
0 0 4 8 13 15
0 0 4 8 13 15
0 4 2
B D G
0 3 3 7 8 13
1 4 4 8 8 13
3 4 5
ES – EF Gantt Chart
for Milwaukee Paper
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
A Build internal
components
B Modify roof and floor
C Construct collection
stack
D Pour concrete and
install frame
E Build high-
temperature burner
F Install pollution
control system
G Install air pollution
device
H Inspect and test
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LS – LF Gantt Chart
for Milwaukee Paper
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
A Build internal
components
B Modify roof and floor
C Construct collection
stack
D Pour concrete and
install frame
E Build high-
temperature burner
F Install pollution
control system
G Install air pollution
device
H Inspect and test
CPM assumes we know a fixed time

estimate for each activity and there is no
variability in activity times
PERT uses a probability distribution for
activity times to allow for variability;
PERT’S ability to handle three time
estimates for each activity enables us to
compute the probability that we can
complete the project by a target date
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Three time estimates are required

Optimistic time (a) – if everything
goes according to plan
Pessimistic time (b) – assuming very
unfavorable conditions
Most likely time (m) – most realistic
estimate

Estimate follows beta distribution
Expected time:
t = (a + 4m + b)/6
Variance of times:
v = [(b – a)/6]2
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Estimate follows beta distribution
Expected time: Figure 3.12
t = (a + 4m + b)/6
Variance ofoftimes:
Probability
1 in 100 of
Probability
Probability
< a occurring v = [(b − a)/6]2 of 1 in 100 of
> b occurring
Activity
Time
Optimistic Most Likely Pessimistic

Time (a) Time (m) Time (b)
Probability of Project
Completion
Project variance is computed by
summing the variances of critical
activities
σp2 = Project variance
= ∑(variances of activities
on critical path)
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Completion
Project variance is computed by
summing the variances of critical
Project variance
activities
σp2 = .11 + .11 + 1.00 + 1.78 + .11 = 3.11
Project standard deviation

σp = Project variance
= 3.11 = 1.76 weeks
• Management now has an estimate

not only of expected completion time
for the project but also of the
standard deviation of that estimate
• If the variant for activity A is actually

0.3 (instead of 0.11), what is the new
project std dev? 1.817
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Completion
PERT makes two more assumptions:
Total project completion times follow a

normal probability distribution
Activity times are statistically
independent
Completion
Standard deviation = 1.76 weeks
15 Weeks
(Expected Completion Time)
Figure 3.13
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Completion
What is the probability this project can
be completed on or before the 16 week
deadline?
Z = due – expected date /σp

date of completion
= (16 wks – 15 wks)/1.76
= 0.57 Where Z is the number of

standard deviations the due
date or target date lies from
the mean or expected date
Completion
From Appendix I
What is the probability
.00 .01 this project
.07 can
.08
be completed on or before
.1 .50000 .50399
the 16 week
.52790 .53188
deadline?.2 .53983 .54380 .56749 .57142
.5 = due .69497
Z.69146 − expected.71566
date /σ
.71904
p
date of completion
.6 .72575 .72907 .74857 .75175
= (16 wks − 15 wks)/1.76
= 0.57 Where Z is the number of

standard deviations the due
date or target date lies from
the mean or expected date
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Completion
0.57 Standard deviations
Probability
(T ≤ 16 weeks)
is 71.57%
15 16 Time
Weeks Weeks
Figure 3.14
• Joni wants to find the due date that

gives her company’s project a 99%
chance of on-time completion
• She first needs to compute the Z-
value corresponding to 99%,…..the
unknown is now Z rather than the
due date
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Determining Project
Completion Time
Probability
of 0.99
Probability
of 0.01
2.33 Standard Z
From Appendix I deviations
0 2.33
Figure 3.15
Variability of Completion
Time for Noncritical Paths
Variability of times for activities on
noncritical paths must be
considered when finding the
probability of finishing in a
specified time
Variation in noncritical activity
may cause change in critical path
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What Project Management

Has Provided So Far
1. The project’s expected completion time
is 15 weeks
2. There is a 71.57% chance the equipment
will be in place by the 16 week deadline
3. Five activities (A, C, E, G, and H) are on
the critical path
4. Three activities (B, D, F) are not on the
critical path and have slack time
5. A detailed schedule is available
Trade-Offs and Project

Crashing
It is not uncommon to face the
following situations:
The project is behind schedule
The completion time has been
moved forward
Shortening the duration of the

project is called project crashing
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Factors to Consider When

Crashing a Project
The amount by which an activity is
crashed is, in fact, permissible
Taken together, the shortened
activity durations will enable us to
finish the project by the due date
The total cost of crashing is as
small as possible
Steps in Project Crashing
1. Compute the crash cost per time period.

If crash costs are linear over time:
Crash cost (Crash cost – Normal cost)

per period =
(Normal time – Crash time)
2. Using current activity times, find the

critical path and identify the critical
activities
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3. If there is only one critical path, then
select the activity on this critical path
that (a) can still be crashed, and (b) has
the smallest crash cost per period. If
there is more than one critical path, then
select one activity from each critical path
such that (a) each selected activity can
still be crashed, and (b) the total crash
cost of all selected activities is the
smallest. Note that the same activity may
be common to more than one critical
path.

4. Update all activity times. If the desired
due date has been reached, stop. If not,
return to Step 2.
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Crashing The Project

Time (Wks) Cost ($)
Crash Cost Critical
Activity Normal Crash Normal Crash Per Wk ($) Path?
A 2 1 22,000 22,750 750 Yes

B 3 1 30,000 34,000 2,000 No
C 2 1 26,000 27,000 1,000 Yes
D 4 2 48,000 49,000 1,000 No
E 4 2 56,000 58,000 1,000 Yes
F 3 2 30,000 30,500 500 No
G 5 2 80,000 84,500 1,500 Yes
H 2 1 16,000 19,000 3,000 Yes
Table 3.5
Crash and Normal Times

and Costs for Activity B
Activity
Cost
Crash
$34,000 — Crash Cost – Normal Cost

Crash Cost/Wk =
Normal Time – Crash Time
Crash $33,000 — $34,000 – $30,000
Cost =
$32,000 —
3–1
$4,000
= = $2,000/Wk
$31,000 — 2 Wks
$30,000 —
Normal
Normal —
Cost
| | |
1 2 3 Time (Weeks)
Figure 3.16
Crash Time Normal Time
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Critical Path and Slack Times

for Milwaukee Paper
A C F
0 2 2 4 4 7
0 2 2 4 10 13
2 2 3
Start Slack = 0 Slack = 0 E Slack = 6 H
0 0 4 8 13 15
0 0 4 8 13 15
0 4 2
B D Slack = 0 G Slack = 0
0 3 3 7 8 13
1 4 4 8 8 13
3 4 5
Slack = 1 Slack = 1 Slack = 0
Figure 3.17
Advantages of PERT/CPM
1. Especially useful when scheduling and
controlling large projects
2. Straightforward concept and not
mathematically complex
3. Graphical networks help highlight
relationships among project activities
4. Critical path and slack time analyses help
pinpoint activities that need to be closely
watched
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Advantages of PERT/CPM
5. Project documentation and graphics
point out who is responsible for various
activities
6. Applicable to a wide variety of projects
7. Useful in monitoring not only schedules
but costs as well
Limitations of PERT/CPM
1. Project activities have to be clearly
defined, independent, and stable in their
relationships
2. Precedence relationships must be
specified and networked together
3. Time estimates tend to be subjective and
are subject to fudging by managers
4. There is an inherent danger of too much
emphasis being placed on the longest, or
critical, path
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Project Management Software
There are several popular packages

for managing projects
Primavera
MacProject
Pertmaster
VisiSchedule
Time Line
Microsoft Project
Using Microsoft Project
Program 3.1
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Program 3.2
Program 3.3
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16/09/2014
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PowerPoint slides by Jeff Heyl

© 2011 Pearson Education, Inc. publishing as Prentice Hall 3-1

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Scheduling, and Controlling

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1. All necessary activities are finished in order

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Work Breakdown Structure

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Work Breakdown Structure

Software Project System

Ensure Compatibility Cost/Schedule Defect

Compatible with Figure 3.3

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A Simple Gantt Chart

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Service For a Delta Jet

Project Control Reports

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PERT and CPM

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Six Steps PERT & CPM

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Six Steps PERT & CPM

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Questions PERT & CPM

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Questions PERT & CPM

A Comparison of AON and

A Comparison of AON and

A Comparison of AON and

© 2011 Pearson Education, Inc. publishing as Prentice Hall Figure 3.5 3 - 44

AON Network for

AON Network for

AON Network for

Arrows Show Precedence

AOA Network for

Determining the Project

Determining the Project

Determining the Project

Determining the Project

Figure 3.10 Activity Duration

If an activity has only a single immediate

ES = Max {EF of all immediate predecessors}