Chapter3 001

Operations
Management
Chapter 3
Project Management
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e
2006
Prentice
Hall, Inc. Hall, Inc.
2006
Prentice
31
Examples of Projects
Building Construction
Research Project
2006 Prentice Hall, Inc.
32
Management of Projects
Planning - goal setting, defining the
project, team organization
Scheduling - relates people, money,
and supplies to specific activities
and activities to each other
Controlling - monitors resources,
costs, quality, and budgets; revises
plans and shifts resources to meet
time and cost demands
33
The Role of
the Project Manager
Highly visible
Responsible for making sure that:
All necessary activities are finished in order
and on time
The project comes in within budget
The project meets quality goals
The people assigned to the project receive
motivation, direction, and information
34
The Role of
the Project Manager
Highly visible
Project
managers
Responsible for making
sure
that: should be:
Good coaches
All necessary activities are finished in order
Good communicators
and on time
in
Able
to organize
The project comes
within
budget activities
from a variety of disciplines
The project meets quality goals
The people assigned to the project receive
motivation, direction, and information
35
Work Breakdown Structure

Level
1. Project
2.
3.
4.
Major tasks in the project

Subtasks in the major tasks
Activities (or work packages)
to be completed
36
Work Breakdown Structure

Level ID
Number
Activity
1.0
Develop/launch Windows Longhorn OS
1.1
Development of GUIs
1.2
Ensure compatibility with earlier

Windows versions
1.21
Compatibility with Windows ME
1.22
Compatibility with Windows XP
1.23
Compatibility with Windows 2000
1.231
Level
Ability to import files

Figure 3.3
37
Project Scheduling
Identifying precedence
relationships
Sequencing activities
Determining activity times & costs
Estimating material and worker
requirements
Determining critical activities
38
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
39
Project Management
Techniques
Gantt chart
Critical Path Method
(CPM)
Program Evaluation
and Review
Technique (PERT)
3 10
A Simple Gantt Chart

J
Time
A M J
Design
Prototype
Test
Revise
Production
3 11
Service For A Delta Jet

Passengers
Baggage
Fueling
Cargo and mail
Galley servicing
Lavatory servicing
Drinking water
Cabin cleaning
Cargo and mail
Flight services
Operating crew
Baggage
Passengers
Figure 3.4
Deplaning
Baggage claim
Container offload
Pumping
Engine injection water
Container offload
Main cabin door
Aft cabin door
Aft, center, forward
Loading
First-class section
Economy section
Container/bulk loading
Galley/cabin check
Receive passengers
Aircraft check
Loading
Boarding
15
30
Minutes
45
60
3 12
PERT and CPM

Network techniques
Developed in 1950s
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
3 13
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
3 14
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
3 15
A Comparison of AON and

AOA Network Conventions
Activity on
Node (AON)
(a) A
B
A
(b)
C
B
B
(c)
Figure 3.5
Activity
Meaning
A comes before
B, which comes
before C
A and B must both
be completed
before C can start
B and C cannot
begin until A is
completed
Activity on
Arrow (AOA)
A
A
B
C
B
C
3 16
AON Example
Milwaukee Paper Manufacturing's
Activities and Predecessors
Activity
A
Description
Build internal components
Immediate
Predecessors
Modify roof and floor
Construct collection stack
Pour concrete and install frame
A, B
Build high-temperature burner
Install pollution control system
Install air pollution device
D, E
Inspect and test
F, G
Table 3.1
3 17
AON Network for

Milwaukee Paper
A
Activity A
(Build Internal Components)
Activity B
(Modify Roof and Floor)
Start
Start
Activity
Figure 3.6
3 18
AON Network for

Milwaukee Paper
Activity A Precedes Activity C
A
Start
Activities A and B
Precede Activity D
Figure 3.7
3 19
AON Network for

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

Relationships
Figure 3.8
3 20
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
3 21

Schedule
Activity
A
B
C
D
E
F
G
H
Description
Time (weeks)
Build internal components
2
Modify roof and floor
3
Construct collection stack
2
Pour concrete and install frame
4
Build high-temperature burner
4
Install pollution control system
3
5
Inspect and test
2
Total Time (weeks)
25
Table 3.2
3 22

Schedule
Activity
A
B
C
D
E
F
G
H
Earliest start (ES) =

earliest time at
Description
(weeks)
which an activity can start, Time
assuming
Build internal
components
2
all predecessors
have been completed
ModifyEarliest
roof and
floor(EF) =
3 at
finish
earliest time
which
an activity
can be finished 2
Construct
collection
stack
Pour concrete
and(LS)
install
Latest start
= frame
latest time4 at
which an activity can
start so as to
Build high-temperature
burner
4 not
the completion
time of the entire
Install delay
pollution
control system
3
project
5
Latest finish (LF) =
latest time by
Inspect
and
test
2 so
which an activity has to be finished
Table 3.2
Total Time
25 of
as to(weeks)
not delay the completion time
3 23
the entire project

Schedule
Activity Name
or Symbol
A
Earliest
Start
ES
EF
Latest
Start
LS
LF
Figure 3.10
Earliest
Finish
Latest
Finish
Activity Duration
3 24
Forward Pass
Begin at starting event and work forward
Earliest Start Time Rule:
If an activity has only one 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)
3 25
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
3 26
ES/EF Network for

Milwaukee Paper
ES
EF = ES + Activity time
0
Start
3 27
ES/EF Network for

Milwaukee Paper
ES
of A
0
Start
EF of A =
ES of A + 2
3 28
ES/EF Network for

Milwaukee Paper
0
A
2
Start
ES
of B
EF of B =
ES of B + 3
3
3 29
ES/EF Network for

Milwaukee Paper
0
2
0
Start
0
0
3 30
ES/EF Network for

Milwaukee Paper
0
2
0
Start
= Max (2, 3)
D
3
B
3
4
3 31
ES/EF Network for

Milwaukee Paper
0
2
0
Start
0
0
B
3
3 32
ES/EF Network for

Milwaukee Paper
0
2
0
Start
13
4
0
B
3
D
4
15
2
8
13
5
Figure 3.11
3 33
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)
3 34
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
3 35
LS/LF Times for

Milwaukee Paper
0
2
0
Start
C
2
13
13
4
0
B
3
3
4
Figure 3.12
LS =3 LF
D Activity time
G
7
8
H
2
15
15
13
LF = EF
of Project
3 36
LS/LF Times for

Milwaukee Paper
0
2
0
Start
10
F
3
7
13
8 of
LF =4 Min(LS
following activity)
13
13
B
3
D
4
H
2
15
15
13
Figure 3.12
3 37
LS/LF Times for

LF = Min(4, 10)
Milwaukee Paper
0
2
0
Start
C
2
10
4
4
0
0
B
3
D
4
E
4
F
3
7
13
13
13
8
8
G
5
H
2
15
15
13
13
Figure 3.12
3 38
LS/LF Times for

Milwaukee Paper
0
0
0
0
Start
A
2
C
2
10
0
1
B
3
D
4
E
4
F
3
7
13
13
13
G
5
H
2
15
15
13
13
Figure 3.12
3 39
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
3 40
Computing Slack Time

Earliest Earliest
Start
Finish
Activity
ES
EF
A
B
C
D
E
F
G
H
0
0
2
3
4
4
8
13
2
3
4
7
8
7
13
15
Latest
Start
LS
Latest
Finish
LF
Slack
LS ES
On
Critical
Path
0
1
2
4
4
10
8
13
2
4
4
8
8
13
13
15
0
1
0
1
0
6
0
0
Yes
No
Yes
No
Yes
No
Yes
Yes
Table 3.3
3 41
Critical Path for

Milwaukee Paper
0
0
0
0
Start
A
2
C
2
10
0
1
B
3
D
4
E
4
F
3
7
13
13
13
G
5
H
2
15
15
13
13
Figure 3.13
3 42
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?
3 43
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?
3 44
ES EF Gantt Chart
for Milwaukee Paper
1
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 hightemperature burner
F Install pollution
control system
G Install air pollution
device
H Inspect and test
3 45
LS LF Gantt Chart
for Milwaukee Paper
1
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 hightemperature burner
F Install pollution
control system
G Install air pollution
device
H Inspect and test
3 46
Variability in Activity Times

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
3 47

Three time estimates are required
Optimistic time (a) if everything goes
according to plan
Mostlikely time (m) most realistic
estimate
Pessimistic time (b) assuming very
unfavorable conditions
3 48

Estimate follows beta distribution
Expected time:
t = (a + 4m + b)/6
Variance of times:
v = [(b a)/6]2
3 49

Estimate follows beta distribution
Probability
Expected time:
t = (a + 4m + b)/6
Variance of times:
Probability of
v = [(b a)/6]2 Probability
1 in 100 of
< a occurring
of 1 in 100 of
> b occurring
Activity
Time
Optimistic
Time (a)
Most Likely
Time (m)
Pessimistic
Time (b)
3 50
Computing Variance
Activity
A
B
C
D
E
F
G
H
Optimistic
Most
Likely
Pessimistic
Expected
Time
Variance
t = (a + 4m + b)/6
[(b a)/6]2
1
2
1
2
1
1
3
1
2
3
2
4
4
2
4
2
3
4
3
6
7
9
11
3
2
3
2
4
4
3
5
2
.11
.11
.11
.44
1.00
1.78
1.78
.11
Table 3.4
3 51
Probability of Project
Completion
Project variance is computed by
summing the variances of critical
activities
p2 = Project variance
= (variances of activities
on critical path)
3 52
Completion
Project variance is computed by
summing the variances of critical
Project variance
activities
p2 = .11 + .11 + 1.00 + 1.78 + .11 = 3.11

Project standard deviation
p =
=
Project variance
3.11 = 1.76 weeks
3 53
Completion
PERT makes two more assumptions:
Total project completion times follow a
normal probability distribution
Activity times are statistically
independent
3 54
Completion
Standard deviation = 1.76 weeks
15 Weeks
Figure 3.15
(Expected Completion Time)

3 55
Completion
What is the probability this project can
be completed on or before the 16 week
deadline?
Z = due expected date / p
date
of completion
= (16 wks 15 wks)/1.76

= 0.57
Where Z is the number of

standard deviations the due
date lies from the mean
3 56
Completion
From Appendix I
What is the probability
can
.00
.01 this project
.07
.08
be completed
on or
before the
16 week
.1 .50000
.50399
.52790
.53188
deadline?
.2 .53983 .54380
.56749 .57142
.5
.6
Z = due expected date / p

.69146 .69497
.71566 .71904
date
.72575
.72907
= (16 wks
.74857
.75175
)/1.76
= (16 wks 15 wks
= 0.57
of completion
Where Z is the number of

standard deviations the due
date lies from the mean
3 57
Completion
Probability
(T 16 weeks)
is 71.57%
0.57 Standard deviations
15
Weeks
16
Weeks
Time
Figure 3.16
3 58
Determining Project
Completion Time
Probability
of 0.99
Probability
of 0.01
From Appendix I
Figure 3.17
2.33 Standard
deviations
2.33
3 59
What Project Management

Has Provided So Far
The projects expected completion time
is 15 weeks
There is a 71.57% chance the equipment
will be in place by the 16 week deadline
Five activities (A, C, E, G, and H) are on
the critical path
Three activities (B, D, F) have slack time
and are not on the critical path
A detailed schedule is available
3 60
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
3 61
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
3 62
Steps in Project Crashing

1. Compute the crash cost per time period. If
crash costs are linear over time:
(Crash cost Normal cost)
Crash cost =
(Normal time Crash time)
per period
2. Using current activity times, find the
critical path and identify the critical
activities
3 63

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 a single activity may
be common to more than one critical
path.
3 64

4. Update all activity times. If the desired
due date has been reached, stop. If not,
return to Step 2.
3 65
Crashing The Project

Time (Wks)
Activity Normal Crash
A
B
C
D
E
F
G
H
2
3
2
4
4
3
5
2
1
1
1
2
2
2
2
1
Cost ($)
Crash Cost Critical
Normal
Crash Per Wk ($) Path?
22,000
30,000
26,000
48,000
56,000
30,000
80,000
16,000
22,750
34,000
27,000
49,000
58,000
30,500
84,500
19,000
750
2,000
1,000
1,000
1,000
500
1,500
3,000
Yes
No
Yes
No
Yes
No
Yes
Yes
Table 3.5
3 66
Crash and Normal Times

and Costs for Activity B
Activity
Cost
Crash
Crash Cost Normal Cost
Crash Cost/Wk = Normal Time Crash Time
$34,000
$33,000
$34,000 $30,000
31
$4,000
=
= $2,000/Wk
2 Wks
Crash
Cost $32,000
$31,000
$30,000
Normal
Cost
Figure 3.18
Normal
|
1
Crash Time
|
2
|
3
Normal Time
Time (Weeks)
3 67
Critical Path And Slack Times

For Milwaukee Paper
0
0
0
0
Start
A
2
Slack = 0
10
Slack = 0
4
4
0
1
B
3
Slack = 1
D
4
7
8
Slack = 1
E
4
F
3
7
13
Slack = 6
13
Slack = 0
13
8
8
G
5
13
H
2
15
15
Slack = 0
13
Slack = 0
Figure 3.19
3 68
Advantages of PERT/CPM
1. Especially useful when scheduling and
controlling large projects
2. Straightforward concept and not
mathematically complex
3. Graphical networks help to perceive
relationships among project activities
4. Critical path and slack time analyses help
pinpoint activities that need to be closely
watched
3 69
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
3 70
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
3 71
Ethical Issues
Bid rigging divulging confidential information
to give some bidders an unfair advantage
Low balling contractors try to buy the
project by bidding low and hope to renegotiate
or cut corners
Bribery particularly on international projects
Expense account padding
Use of substandard materials
Compromising health and safety standards
Withholding needed information
Failure to admit project failure at close
3 72
Using Microsoft Project
Program 3.1
3 73
Program 3.2
3 74
Program 3.3
3 75
Program 3.4
3 76
Program 3.5
3 77
Program 3.6
3 78
Program 3.7
3 79

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Operations

Work Breakdown Structure

2006 Prentice Hall, Inc.

Major tasks in the project

Work Breakdown Structure

Develop/launch Windows Longhorn OS

Ensure compatibility with earlier

Compatibility with Windows ME

Compatibility with Windows XP

Compatibility with Windows 2000

Ability to import files

2006 Prentice Hall, Inc.

Project Control Reports

2006 Prentice Hall, Inc.

A Simple Gantt Chart

2006 Prentice Hall, Inc.

Service For A Delta Jet

PERT and CPM

Consider precedence relationships and

Six Steps PERT & CPM

Six Steps PERT & CPM

A Comparison of AON and

Modify roof and floor

Construct collection stack

Pour concrete and install frame

Build high-temperature burner

Install pollution control system

Install air pollution device

Inspect and test

2006 Prentice Hall, Inc.

AON Network for

AON Network for

AON Network for

Arrows Show Precedence

Determining the Project

Determining the Project

2006 Prentice Hall, Inc.

Determining the Project

Earliest start (ES) =

Determining the Project

2006 Prentice Hall, Inc.

ES/EF Network for

2006 Prentice Hall, Inc.

ES/EF Network for

2006 Prentice Hall, Inc.

ES/EF Network for

ES/EF Network for

2006 Prentice Hall, Inc.

ES/EF Network for

2006 Prentice Hall, Inc.

ES/EF Network for

2006 Prentice Hall, Inc.

ES/EF Network for

2006 Prentice Hall, Inc.

2006 Prentice Hall, Inc.

LS/LF Times for

2006 Prentice Hall, Inc.

LS/LF Times for

LS/LF Times for

LS/LF Times for

Computing Slack Time

2006 Prentice Hall, Inc.

Computing Slack Time