Project Management

1. Project Management

Chapter 9
Project Management
Operations Management - 5th Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga

2. Lecture Outline

Project Planning
Project Scheduling
Project Control
CPM/PERT
Probabilistic Activity Times
Project Crashing and Time-Cost
Trade-off
Copyright 2006 John Wiley & Sons, Inc.
9-2

3. What is a Project?

Project
unique, one-time operational activity or effort
Examples
constructing houses, factories, shopping malls, athletic
stadiums or arenas
developing military weapons systems, aircrafts, new ships
launching satellite systems
constructing oil pipelines
developing and implementing new computer systems
planning concert, football games, or basketball tournaments
introducing new products into market
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4. Project Elements

Objective
Scope
Contract requirements
Schedules
Resources
Personnel
Control
Risk and problem analysis
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5. Project Management Process

Project planning
Project scheduling
Project control
Project team
made up of individuals from various areas and
departments within a company
Matrix organization
a team structure with members from functional areas,
depending on skills required
Project Manager
most important member of project team
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6. Project Scope

Scope statement
a document that provides an understanding,
justification, and expected result of a project
Statement of work
written description of objectives of a project
Work breakdown structure
breaks down a project into components,
subcomponents, activities, and tasks
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7.

Work Breakdown Structure for Computer Order
Processing System Project
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8.

Organizational Breakdown Structure
a chart that shows which organizational units are
responsible for work items
Responsibility Assignment Matrix
shows who is responsible for work in a project
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9-8

9. Project Scheduling

Steps
Define activities
Sequence
activities
Estimate time
Develop schedule
Copyright 2006 John Wiley & Sons, Inc.
Techniques
Gantt chart
CPM
PERT
Microsoft Project
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10. Gantt Chart

Graph or bar chart with a bar for each
project activity that shows passage of
time
Provides visual display of project
schedule
Slack
amount of time an activity can be delayed
without delaying the project
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11. Example of Gantt Chart

0
|
2
|
Month
4
|
6
|
8
|
10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials
Build house
Select paint
Select carpet
Finish work
1
3
5
7
9
Month
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12. Project Control

Time management
Cost management
Quality management
Performance management
Earned Value Analysis
a standard procedure for numerically measuring a
project’s progress, forecasting its completion date and
cost and measuring schedule and budget variation
Communication
Enterprise project management
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13. CPM/PERT

Critical Path Method (CPM)
DuPont & Remington-Rand (1956)
Deterministic task times
Activity-on-node network construction
Project Evaluation and Review Technique
(PERT)
US Navy, Booz, Allen & Hamilton
Multiple task time estimates
Activity-on-arrow network construction
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14. Project Network

Activity-on-node (AON)
nodes represent activities,
and arrows show
precedence relationships
Activity-on-arrow (AOA)
arrows represent activities
and nodes are events for
points in time
Event
Node
1
2
3
Branch
completion or beginning
of an activity in a project
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15. AOA Project Network for a House

3
Lay
foundation
2
1
3
Design house
and obtain
financing
2
Dummy
Build
house
0
1
Order and
receive
materials
4
Select
paint
Finish
work
6
3
1
1
1
7
Select
carpet
5
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16.

Concurrent Activities
Lay foundation
2
3
Lay
foundation
3
Order material
(a) Incorrect precedence
relationship
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2
Dummy
2
0
1
4
Order material
(b) Correct precedence
relationship
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17. AON Network for House Building Project

Lay foundations
Build house
4
3
2
2
Start
Finish work
7
1
1
3
Design house
and obtain
financing
3
1
Order and receive
materials
Copyright 2006 John Wiley & Sons, Inc.
5
1
6
1
Select carpet
Select paint
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18.

Critical Path
4
3
2
2
Start
7
1
1
3
3
1
A:
B:
C:
D:
1-2-4-7
3 + 2 + 3 + 1 = 9 months
1-2-5-6-7
3 + 2 + 1 + 1 + 1 = 8 months
1-3-4-7
3 + 1 + 3 + 1 = 8 months
1-3-5-6-7
3 + 1 + 1 + 1 + 1 = 7 months
Copyright 2006 John Wiley & Sons, Inc.
6
1
5
1
Critical path
Longest path
through a network
Minimum project
completion time
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19. Activity Start Times

Start at 5 months
4
3
2
2
Start
Finish at 9 months
7
1
1
3
3
1
Start at 3 months
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5
1
Finish
6
1
Start at 6 months
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20. Mode Configuration

Activity number
Earliest start
Earliest finish
1
0
3
3
0
3
Latest finish
Activity duration
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Latest start
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21. Forward Pass

Start at the beginning of CPM/PERT network to
determine the earliest activity times
Earliest Start Time (ES)
earliest time an activity can start
ES = maximum EF of immediate predecessors
Earliest finish time (EF)
earliest time an activity can finish
earliest start time plus activity time
EF= ES + t
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22. Earliest Activity Start and Finish Times

Lay foundations
Build house
2
Start
3
5
4
2
5
8
3
1
0
3
7
1
Design house
and obtain
financing
8
9
1
6
3
3
4
1
Order and receive
materials
Copyright 2006 John Wiley & Sons, Inc.
6
7
Finish work
1
5
5
6
1
Select carpet
Select pain
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23. Backward Pass

Determines latest activity times by starting at
the end of CPM/PERT network and working
forward
Latest Start Time (LS)
Latest time an activity can start without delaying
critical path time
LS= LF - t
Latest finish time (LF)
latest time an activity can be completed without
delaying critical path time
LS = minimum LS of immediate predecessors
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24. Latest Activity Start and Finish Times

Lay foundations
Build house
Start
2
3
5
2
3
5
4
5
8
3
5
8
1
0
3
7
8
9
1
0
3
1
8
9
Design house
and obtain
financing
3
3
4
1
4
5
Order and receive
materials
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5
1
5
6
6
6
7
1
7
8
Finish work
6
7
Select carpet
Select pain
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25. Activity Slack

Activity
LS
ES
LF
EF
Slack S
*1
0
0
3
3
0
*2
3
3
5
5
0
3
4
3
5
4
1
*4
5
5
8
8
0
5
6
5
7
6
1
6
7
6
8
7
1
*7
8
8
9
9
0
* Critical Path
Copyright 2006 John Wiley & Sons, Inc.
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26. Probabilistic Time Estimates

Beta distribution
a probability distribution traditionally used in
CPM/PERT
a + 4m + b
Mean (expected time):
t=
6
Variance:
b-a
= 6
2
2
where
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate
Copyright 2006 John Wiley & Sons, Inc.
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27.

P(time)
P(time)
Examples of Beta Distributions
a
m
t
b
a
t
Time
m
b
P(time)
Time
a
m=t
b
Time
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9-27

28. Project Network with Probabilistic Time Estimates: Example

Equipment
installation
1
4
6,8,10
2,4,12
System
development
Start
Equipment testing
and modification
2
3,6,9
Position
recruiting
System
training
8
Manual
testing
3,7,11
5
2,3,4
Final
debugging
10
1,4,7
Finish
11
9
Job Training
2,4,6
3
6
1,3,5
3,4,5
System
testing
1,10,13
System
changeover
Orientation
7
2,2,2
Copyright 2006 John Wiley & Sons, Inc.
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29.

Activity Time Estimates
TIME ESTIMATES (WKS)
ACTIVITY
1
2
3
4
5
6
7
8
9
10
11
MEAN TIME
VARIANCE
a
m
b
t
б2
6
3
1
2
2
3
2
3
2
1
1
8
6
3
4
3
4
2
7
4
4
10
10
9
5
12
4
5
2
11
6
7
13
8
6
3
5
3
4
2
7
4
4
9
0.44
1.00
0.44
2.78
0.11
0.11
0.00
1.78
0.44
1.00
4.00
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30.

Activity Early, Late Times,
and Slack
ACTIVITY
1
2
3
4
5
6
7
8
9
10
11
t
б
ES
EF
LS
LF
S
8
6
3
5
3
4
2
7
4
4
9
0.44
1.00
0.44
2.78
0.11
0.11
0.00
1.78
0.44
1.00
4.00
0
0
0
8
6
3
3
9
9
13
16
8
6
3
13
9
7
5
16
13
17
25
1
0
2
16
6
5
14
9
12
21
16
9
6
5
21
9
9
16
16
16
25
25
1
0
2
8
0
2
11
0
3
8
0
Copyright 2006 John Wiley & Sons, Inc.
9-30

31. Earliest, Latest, and Slack

1 0
8 1
Start
2 0
6 0
3 0
3 2
8
9
4 8
5 16 21
3
5
10 13 17
8 9
7 9
6
6
Critical Path
13
5 6
3 6
6 3
4 5
16
7
3
Finish
16
9
9
1 0
9 9 13
4 12 16
11 16 25
9 16 25
9
7 3 5
2 14 16
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32.

Total project variance
2 = б22 + б52 + б82 + б112
= 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks
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9-32

33. Probabilistic Network Analysis

Determine probability that project is
completed within specified time
Z=
where
x-
= tp = project mean time
= project standard deviation
x = proposed project time
Z = number of standard deviations x
is from mean
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9-33

34. Normal Distribution Of Project Time

Probability
Z
= tp
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x
Time
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35. Southern Textile Example

What is the probability that the project is completed
within 30 weeks?
P(x 30 weeks)
= 6.89 weeks
2
=
6.89
= 2.62 weeks
Z=
=
x-
30 - 25
2.62
= 1.91
= 25 x = 30
Time (weeks)
From Table A.1, (appendix A) a Z score of 1.91 corresponds to a
probability of 0.4719. Thus P(30) = 0.4719 + 0.5000 = 0.9719
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36. Southern Textile Example

What is the probability that the project is completed
within 22 weeks?
x-
2
Z=
= 6.89 weeks
P(x 22 weeks)
=
6.89
= 2.62 weeks
=
22 - 25
2.62
= -1.14
x = 22 = 25
Time
(weeks)
From Table A.1 (appendix A) a Z score of -1.14 corresponds to a
probability of 0.3729. Thus P(22) = 0.5000 - 0.3729 = 0.1271
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37. Project Crashing

Crashing
reducing project time by expending additional
resources
Crash time
an amount of time an activity is reduced
Crash cost
cost of reducing activity time
Goal
reduce project duration at minimum cost
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38. Project Crashing: Example

4
2
8
12
7
4
1
12
3
4
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5
4
6
4
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39. Project Crashing: Example (cont.)

$7,000 –
$6,000 –
Crash cost
$5,000 –
Crashed activity
Slope = crash cost per week
$4,000 –
$3,000 –
$2,000 –
Normal activity
Normal cost
$1,000 –
Normal time
Crash time
–
0
|
2
|
4
|
6
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|
8
|
10
|
12
|
14
Weeks
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40. Normal Activity and Crash Data

ACTIVITY
1
2
3
4
5
6
7
NORMAL
TIME
(WEEKS)
CRASH
TIME
(WEEKS)
NORMAL
COST
12
8
4
12
4
4
4
7
5
3
9
1
1
3
$3,000
2,000
4,000
50,000
500
500
15,000
$5,000
3,500
7,000
71,000
1,100
1,100
22,000
$75,000
$110,700
Copyright 2006 John Wiley & Sons, Inc.
CRASH
COST
TOTAL
ALLOWABLE
CRASH TIME
(WEEKS)
5
3
1
3
3
3
1
CRASH
COST PER
WEEK
$400
500
3,000
7,000
200
200
7,000
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41.

$7000
$500
Project Duration:
36 weeks
4
2
8
$700
12
7
4
1
FROM …
12
$400
3
4
6
4
5
4
$3000
$200
$200
$7000
$500
4
2
8
TO…
Project Duration:
31 weeks
Additional Cost:
$2000
$700
12
7
4
1
7
$400
3
4
$3000
Copyright 2006 John Wiley & Sons, Inc.
5
4
6
4
$200
$200
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42. Time-Cost Relationship

Crashing costs increase as project
duration decreases
Indirect costs increase as project
duration increases
Reduce project length as long as
crashing costs are less than indirect
costs
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9-42

43. Time-Cost Tradeoff

Minimum cost = optimal project time
Total project cost
Cost ($)
Indirect cost
Direct cost
Crashing
Time
Project duration
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44.

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use of the information herein.
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