17 Project Management McGraw-Hill/Irwin Copyright © 2007 by The

17 Project Management McGraw-Hill/Irwin Copyright 2007 by The McGraw-Hill Companies, Inc. All

Learning Objectives 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. 17-2

Learning Objectives 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. 17-3

Projects JAN FEB MAR APR MAY JUN Build A A Done Build B B Done Build C C Done Build D On time! Ship Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame. 17-4

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 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 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 What are the tools? Work breakdown structure Network diagram Gantt charts Risk management 17-8

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

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 Manager Responsible for: Work Human Resources Communications Quality Time Costs 17-11

Ethical Issues Temptation to understate costs Withhold information Misleading status reports Falsifying records Comprising workers’ safety Approving substandard work 17-12

Project Life Cycle Concept Planning Execution Management Feasibility Termination 17-13

Work Breakdown Structure Figure 17.2 Project Project X X Level 1 Level 2 Level 3 Level 4 17-14

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 17-15

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. 17-16

The Network Diagram (cont’d) 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 Network – Activity on Arrow Figure 17.4 AOA Locate facilities Order furniture 4 Furniture setup 2 Remodel 1 5 Interview 3 Move in 6 Hire and train 17-18

Project Network – Activity on Node Figure 17.4 Order furniture AON Locate facilities Furniture setup 2 6 1 Move in Remodel 5 S Interview 3 7 Hire and train 4 17-19

Network Conventions a c a c b a a c b b b d c Dummy activity 17-20

Time Estimates Deterministic Time estimates that are fairly certain Probabilistic Estimates of times that allow for variation 17-21

Example 1 Figure 17.5 8 weeks ate s c Lo ilitie fac 2 4 er e d r O tur i n fur Rem ode l 11 weeks re nitu Fur p u set Deterministic time estimates 6 weeks 1 3 weeks 5 In te rv i 4 weeks ew in a r dt Move in 1 week 6 n a re Hi 9 weeks 3 17-22

Example 1 Solution Critical Path P a th L e n g th S la c k (w e e k s ) 1 -2 -3 -4 -5 -6 1 -2 -5 -6 1 -3 -5 -6 18 20 14 2 0 6 17-23

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

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

Figure 17.8 Probabilistic Estimates Beta Distribution to Activity start Optimistic time tm te Most likely time (mode) tp Pessimistic time 17-26

Expected Time te t 4t t o m p 6 te expected time to optimistic time tm most likely time tp pessimistic time 17-27

Variance 2 (t – t ) p o 36 variance to optimistic time tp pessimistic time 17-28

Example 5 Optimistic time 2-4-6 b 3-5-7 e 6 32- g 4-6-8 h Pessimistic time 5 32- c -4 3 1 a 3-4-5 d Most likely time 5-7-9 f -6 4 3- i 17-29

Example 5 Time Estimates 3 8 . 2 a 4.00 d 4.00 b 5.0 e 3 3.3 g 6.0 h 7 3.1 c Tabc 10.0 Tdef 16.0 Tghi 13.50 7.0 f .4 17 i 17-30

Path Probabilities Z Specified time – Path mean Path standard deviation Z indicates how many standard deviations of the path distribution the specified tine is beyond the expected path duration. 17-31

Example 6 17 Weeks 1.00 a-b-c Weeks 10.0 d-e-f 16.0 Weeks 1.00 g-h-i 13.5 Weeks 17-32

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 17-33

Time-Cost Trade-Offs: Crashing Figure 17.11 Total cost Expected indirect costs Shorten CRASH Cumulative cost of crashing Shorten Optimum 17-34

Example 7 6 b a 10 2 f 9 5 e c 4 d 17-35

Advantages of PERT Forces managers to organize Provides graphic display of activities Identifies Critical activities Slack activities 4 2 1 5 6 3 17-36

Limitations of PERT Important activities may be omitted Precedence relationships may not be correct 4 Estimates may include 2 a fudge factor 5 May focus solely 1 on critical path 142 weeks 6 3 17-37

Goldratt’s Critical Chain Goldratt’s insight on project management Time estimates are often pessimistic Activities finished ahead of schedule often go unreported With multiple projects, resources needed for one project may be in use on another 17-38

Project Management Software Computer aided design (CAD) Groupware (Lotus Notes) CA Super Project Harvard Total Manager MS Project Sure Track Project Manager Time Line 17-39

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 17-40

Project Risk Management Risk: occurrence of events that have undesirable consequences Delays Increased costs Inability to meet specifications Project termination 17-41

Risk Management Identify potential risks Analyze and assess risks Work to minimize occurrence of risk Establish contingency plans 17-42

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 17-43