Transcript Project
Project management; Chapter7
Department of Business Administration
FALL 2010-2011
Chapter 7: Project Management
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Project Management; Chapter7
Outline: What You Will Learn . . .
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.
List the kinds of information that a PERT or CPM analysis can
provide.
Analyze networks with deterministic times.
Analyze networks with probabilistic times.
Describe activity “crashing” and solve typical problems.
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Project Management; Chapter7
Projects
JAN
FEB
MAR
APR
MAY
JUN
Build A
A Done
Build B
B Done
Build C
C Done
Build D
On time!
Ship
Project: Unique, one-time operations designed
to accomplish a specific set of objectives in a
limited time frame.
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Project Management; Chapter7
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
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 communication
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Project Management; Chapter7
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
What are the tools?
Work breakdown structure
Network diagram
Gantt charts
Risk management
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Project Management; Chapter7
Key Decisions
Deciding which projects to implement
Criteria-attractive-cost and benefit-available fund
Selecting a project manager
Central person
Selecting a project team
Person’s knowledge and skills-relationship with others
Planning and designing the project
Goals-timetable-budget-resources
Managing and controlling project resources
Personnel-equipment-budget
Deciding if and when a project should be terminated
Likelihood of success-costs-resources
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Project Management; Chapter7
Project Manager
Responsible for:
Work
Quality
Human Resources
Time
Communications
Costs
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Project Management; Chapter7
Ethical Issues
Temptation to understate costs
Withhold information
Misleading status reports
Falsifying records
Comprising workers’ safety
Approving substandard work
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Project Management; Chapter7
Project Life Cycle
Concept
Planning
Execution
Management
Feasibility
Termination
Concept: A proposal needed
Feasibility: Cost, benefit and risk analyses
Planning: find out the necessary human resources, time and cost
Execution: control for time, available resource and cost
Termination: It should be reevaluated for the sake of project’s safety
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Project Management; Chapter7
Work Breakdown Structure
Project X
Level 1
Level 2
Level 3
Level 4
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Project Management; Chapter7
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
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Project Management; Chapter7
PERT and CPM
PERT: Program Evaluation and Review Technique
CPM: Critical Path Method
Both techniques are widely used for planning and
coordinating large-scale projects.
Using the two techniques, manager are able to obtain:
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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Project Management; Chapter7
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.
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Project Management; Chapter7
The Network Diagram
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
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Project Management; Chapter7
Project Network – Activity on Arrow
AOA
Locate
facilities
Order
furniture
4
Furniture
setup
2
Remodel
1
5
6
Move
in
Interview
3
Hire and
train
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Project Management; Chapter7
Project Network – Activity on Node
Order
furniture
AON
Locate
facilities
Furniture
setup
2
6
1
Move
in
Remodel
5
S
Interview
3
7
Hire and
train
4
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Project Management; Chapter7
Network Conventions
a
c
a
c
b
a
a
c
c
b
b
b
d
Dummy
activity
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Project Management; Chapter7
Time Estimates
The main determinant of the way PERT and CPM networks
are analysed and interpreted is whether activity time estimates
are probabilistic or deterministic.
Deterministic
Time estimates that are fairly certain
Probabilistic
Estimates of times that allow for variation
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Project Management; Chapter7
Example-Bank Network convention
The following table contains information related to the major activities of a
research project. Use the information to do the following:
(a) Draw a precedence diagram using AOA and AON
(b) Find the critical path based AOA.
(c) Determine the expected length of the project.
Activity
Immediate Predecessor
Expected Time (days)
a
-
5
c
a
8
d
c
2
b
a
7
e
-
3
f
e
6
i
b, d
10
m
f,i
8
g
-
1
h
g
2
k
h
17
end
k,m
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Project Management; Chapter7
Answer-Bank Network convention
Activities with no predecessors are at the beginning (life side) of the network.
Activities with multiple predecessors are located at path intersections.
Use first AOA
b
7
S
k
h
2
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End
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Project Management; Chapter7
Answer-Bank Network convention
Activities with no predecessors are at the beginning (life side) of the network.
Activities with multiple predecessors are located at path intersections.
Use Second AON
b
S
k
End
h
21
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Project Management; Chapter7
Example-Bank Network convention
(b)Find the critical path based AOA.
a-c-d-i-m*=5+8+2+10+8=33#
a-b-i-m=5+7+10+8=30
e-f-m= 3+6+8=17
g-h-k=1+2+17=20
a-c-d-i-m*-Critical path
(c) Determine the expected length of the project.
33 # -Expected project duration
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Project Management; Chapter7
Example-Bank Network Figure
Bank Network question
8 weeks
6 weeks
4
3 weeks
2
11 weeks
1
5
Move
in
6
1 week
4 weeks
9 weeks
3
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Project Management; Chapter7
Example-Bank Network Figure
Given the information on the bank network:
Determine
The length of each path
The critical path
The expected length of the project
The amount of slack time for each path
Knowledge of slack times provides managers with
information for planning allocation of scarce resources and
for directing control efforts toward those activities that
may be most susceptible to delaying the project.
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Project Management; Chapter7
Answer-Bank Network Figure
Critical Path
Path
Length
Slack
(weeks)
1-2-3-4-5-6
1-2-5-6
1-3-5-6
18
20
14
2
0
6
25
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Project Management; Chapter7
Computing Algorithm
Network activities
ES: early start
EF: early finish-EF=ES+t
LS: late start-LS=LF-t
LF: late finish
Used to determine
ES t
LS
ES t
EF
LF
EF
Expected project duration
Slack time-LS-ES or LF-EF
Critical path
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Project Management; Chapter7
Example-ES-EF-LS-LF-slack
Required: Compute slack time, ES, EF, LS and LF
4
Forward pass
2
ES t
EF
19 1 20
1
5
6
LS
ES t
EF: early finish-EF=ES+t
LS: late start-LS=LF-t
Slack time-LS-ES or LF-EF
3
LF
EF
Backward pass
27
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Project Management; Chapter7
Answer-ES-EF-LS-LF-slack
Forward pass
10
8
2
0
0
0
8
8
8
6
4
10
4
MGMT 405, POM, 2010/11. Lec Notes
3
EF
4
16
14
2
8 11
8
0
EF: early finish-EF=ES+t
LS: late start-LS=LF-t
Slack time-LS-ES or LF-EF
ES t
2
1
6
0
6
16
14
19
19
10
4
6
3
19
17
19 1 20
5
9
19
13
6
19
19
0
1
20
20
ES t
LS
EF
LF
Backward pass
28
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Project Management; Chapter7
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
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Project Management; Chapter7
Probabilistic Estimates
Beta Distribution is generally used to describe the inherent variability in time
Estimates. Although there is no real theoretical justification for using the Beta
Distribution, it has certain features that make it attractive in practice.
to
Activity
start
tm
Optimistic
time
te
Most likely
time (mode)
tp
Pessimistic
time
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Project Management; Chapter7
Expected Time
te
t
+
4t
+t
o
m
p
=
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time
The knowledge of the expected path times and their std. Deviation
enables a manager to compute probabilistic estimates of the project
completion time as such specific time and scheduled time
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Project Management; Chapter7
Variance
2
2
(t
–
t
)
= p o
36
2 = variance
to = optimistic time
tp = pessimistic time
The size of Variance reflects the degree of uncertainty associated
with an activity’s time:
The large the variance, the greater the uncertainty.
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Project Management; Chapter7
Example-Probabilistic Time Estimates
Given the following diagram:
Optimistic
Compute
time
The expected time
The expected duration
Identify the critical path
The variance
The std. deviation
3-4-5
d
Most likely
time
Pessimistic
time
2-4-6
b
3-5-7
e
5-7-9
f
4-6-8
h
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Project Management; Chapter7
Answer-Probabilistic Time Estimates
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Project Management; Chapter7
Answer-Probabilistic Time Estimates
Tabc = 10.0
Tdef = 16.0
Tghi = 13.50
4.00
b
4.00
d
5.0
e
7.0
f
6.0
h
35
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Project Management; Chapter7
Path Probabilities
Z =
Specified time – Path mean
Path standard deviation
Z indicates how many standard deviations of the path
distribution the specified time is beyond the expected path
duration. The more positive the value, the better. A negative
value of z indicates that the specified time is earlier than the
expected path duration.
Z=+3.00-probability 100% From the relevant table +3.00 is almost equal to 0.9987.
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Project Management; Chapter7
Example-The Path probability
Given the information on the example of probabilistic
time estimates (the previous example):
Determine
The probability that the project can be completed within 17
weeks of its start.
The probability that the project will be completed within 15
weeks of its start.
The probability that the project will not be completed within
15 weeks of its start.
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Project Management; Chapter7
Answer-The Path probability
Determine
The probability that the project can be completed within
17 weeks of its start. Path: a-b-c
17 – 10
Z =
0.97
=7.22
Determine
Prob.comp in 17 week=1.00
Appendix B, Table B, p.p 884/5
The probability that the project will be completed within
17 weeks of its start. Path: d-e-f
17 – 16 =1
Z =
1
Prob.comp in 17 week=0.8413
Appendix B, Table B, p.p 885
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Project Management; Chapter7
Answer-The Path probability
Determine
The probability that the project will be completed within
17 weeks of its start. Path: g-h-i
Z = 17 – 13.5 =3.27
1.07
Prob.comp in 17 week=1.00
Appendix B, Table B, p.p 884/5
Prob finish in 17 week=1.00 X 0.8413 X 1.00= 0.8413
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Project Management; Chapter7
Answer-The Path probability
Determine
The probability that the project can be completed within
15 weeks of its start. Path: a-b-c
15 – 10
Z =
0.97
Determine
=5.15
Prob.comp in 15 week=1.00
Appendix B, Table B, p.p 884/5
The probability that the project will be completed within
15 weeks of its start. Path: d-e-f
15 – 16 =-1.00 Prob.comp in 15 week=0.1587
Z =
1
Appendix B, Table B, p.p 885
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Project Management; Chapter7
Answer-The Path probability
Determine
The probability that the project will be completed within
15 weeks of its start. Path: g-h-i
Z = 15 – 13.5 =1.40
1.07
Prob.comp in 15 week=0.9192
Appendix B, Table B, p.p 884/5
Prob finish in 15 week=1.00 X 0.1587 X 0.9192= 0.1459
The probability that the project will not be completed within 15 weeks of
its start: 1- 0.1459=0.8541
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Project Management; Chapter7
Answer-The Path probability-Graphically
17
Weeks
1.00
a-b-c
Weeks
10.0
0.8413
d-e-f
16.0
Weeks
1.00
g-h-i
13.5
Weeks
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Project Management; Chapter7
Answer-The Path probability-Graphically
15
Weeks
1.00
a-b-c
10.0
Weeks
0.1587
d-e-f
16.0
Weeks
0.9192
g-h-i
13.5
Weeks
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Project Management; Chapter7
Time-cost Trade-offs: Crashing
In many projects, it is possible to reduce the length of a
project by injecting additional resources. The impetus to
shorten projects may reflect efforts to avoid late penalties,
or/ to take advantage of monetary incentives for timely
completion of a project, or/ to free resources for use on
other projects. This is called crashing.
Crash – briefly, 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
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Project Management; Chapter7
Time-Cost Trade-Offs: Crashing
Total
cost
Expected indirect costs
Shorten
CRASH
Cumulative
(direct)
cost of
crashing
Shorten
Optimum
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Project Management; Chapter7
Example-Crashing
Using the following information, develop the optimal time cost solution.
Indirect costs are $ 1000 per day.
(a) Determine which activities are on the critical path, its length, and the
length of the other path
(b) Rank the critical activities in order of lowest crashing cost, and
datermine the number of days each can be crashed.
(c) Determine the critical path after each reduction by shortening the
project.
Activity
Immediate predecessor
Normal time
Crash time
Cost per day to crash
a
-
6
6
c
-
10
8
$500
d
c
5
4
300
b
a
4
1
700
e
d
9
7
600
f
b,e
2
1
800
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Project Management; Chapter7
(a) Determine the critical path.
2
f
4
d
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Project Management; Chapter7
Answer-Crashing
(a) Determine which activities are on the critical path, its length, and the
length of the other path
Path
length
a-b-f
18
c-d-e-f 20 (critical path)
(b) Rank the critical activities in order of lowest crashing cost, and
datermine the number of days each can be crashed.
Activity
Cost per day to crash
Available days
c
$ 300
1
e
600
2
d
700
3
f
800
1
48
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Project Management; Chapter7
Answer-Crashing
(c) Determine the critical path after each reduction by shortening the project.
(1) Shorten activity c one day at a cost of $ 300. The length of the critical
path becomes 19 days.
(2) Activity c cannot be shorten any more. Shorten activity e one day at
cost of $ 600. The length of the critical path c-d-e-f becomes 18 days
which is the same as length of path a-b-f.
(3) The path are now both critical, further improvement will necesitate
shortening both paths.
Path
Activity
Cost per day to crash
a-b-f
a
no reduction possible
b
$ 500
f
800
c-d-e-f
c
no further reduction
possible
d
$ 700
e
600
f
800
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Project Management; Chapter7
Answer-Crashing
At the first glance, it would seem that crashing f would not be
advantageous, because it has the highest crashing cost. However, f is on
both paths, so shortening f by one day would shorten both paths by one
day for a cost of $ 800. The option of shortening the least expensive
activity on each path would cost $ 500 for b and $ 600 for e or $ 1100.
Thus shorten f by one day. The project duration is now 17 days.
(4) At this point, no additional improvement is feasible. The cost to crash
b is $ 500 and the cost to crash e is $ 600, for a total of $ 1100 and that
would exceed the indirect costs of $ 100 per day.
(5) The crashing sequence is summarized below:
Length after crashing n days
Path
n=0
1
2
3
a-b-f
18
18
18
17
c-d-e-f
20
19
18
activity crashed
c
e
cost
$300
600
17
f
800
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Project Management; Chapter7
Advantages of PERT
Forces managers to organize
Provides graphic display of activities
Identifies
Critical activities
Slack activities
4
2
1
5
6
3
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Project Management; Chapter7
Limitations of PERT
Important activities may be omitted
Precedence relationships may not be correct
Estimates may include
a fudge factor
4
May focus solely
on critical path
2
1
5
6
142 weeks
3
52
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Project Management; Chapter7
Thanks
53
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