2104251I N T R O D U C T I O N T O

M A N U F A C T U R I N G S Y S T E M S

C H A P T E R 1 0 :

P R O J E C T M A N A G E M E N T

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P R O J E C T M A N A G E M E N T D E F I N E D

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Project is a series of related jobs usually directed toward some major output and requiring a significant period to perform

Project Management are the management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project

S O M E N E C E S S A R Y T E R M S

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Statement of the work: A written description of the objectives to be achieved.

Task and subtask: A task is a further subdivision of the project.

Work package: A group of activities combined to be assignable to a single organizational unit.

Milestones: Specific events to be reached at points in time.

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W O R K B R E A K D O W N S T R U C T U R E

• A work breakdown structure defines the hierarchy of project tasks, subtasks, and work packages

Program

Project 1 Project 2

Task 1.1

Subtask 1.1.1

Work Package 1.1.1.1

Level

1

2

3

4

Task 1.2

Subtask 1.1.2

Work Package 1.1.1.2

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G A N T T C H A R T

Activity 1Activity 2Activity 3Activity 4Activity 5Activity 6

Time

Vertical Axis: Always Activities or Jobs

Horizontal Axis: Always Time

Horizontal bars used to denote length of time for each activity or job.

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G A N T T C H A R T: E X A M P L E20 4 106 8

31 5 7 9Month

Month

½ ½ ½ ½ ½

½ ½ ½ ½ ½

Activity

Design house andobtain financing

Lay foundation

Order and receivematerials

Build house

Select paint

Select carpet

Finish work

O R G A N I Z A T I O N A L S T R U C T U R E S• It determines the relation between the project and the parent firm.

• Pure project

• Functional project

• Matrix project

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P U R E P R O J E C T

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A PURE PROJECT IS WHERE A SELF-CONTAINED TEAM WORKS FULL-

TIME ON THE PROJECT

EQUIPMENT AND PEOPLE ARE NOT SHARED ACROSS PROJECTS.

A D V A N TA G E S

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The project manager has full authority over the project

Team members report to one boss

Shortened communication lines

Team pride, motivation, and commitment are high

D I S A D V A N T A G E S

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Duplication of resources.

Organizational goals and policies are ignored.

Lack of technology transfer.

Team members have no functional area "home."

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F U N C T I O N A L P R O J E C T

President

Research and development

Engineering Manufacturing

Project Project Project

A B C

Project Project Project

A B C

Project Project Project

A B C

A D V A N TA G E S

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A team member can work on several projects

Technical expertise is maintained within the functional area

The functional area is a “home” after the project is completed

Critical mass of specialized knowledge

D I S A D V A N T A G E S

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Aspects of the project that are not directly related to the functional area get short-changed.

Motivation of team members is often weak.

Needs of the client are secondary and are responded to slowly.

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M A T R I X P R O J E C TPresident

R&D Engineering Manufacturing

PM - 1

PM - 2

PM - 3

A D V A N TA G E S

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Enhanced communications between functional areas

Pinpointed responsibility

Duplication of resources is minimized

Functional “home” for team members

Policies of the parent organization are followed

D I S A D V A N T A G E S

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Too many bosses

Depends on project manager’s negotiating skills

Potential for sub-optimization

N E T W O R K P L A N N I N G

M O D E L S

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A project is made up of a sequence of activities that form a network representing a project

The path taking longest time through this network of activities is called the “critical path”

The critical path provides a wide range of scheduling information useful in managing a project

Critical Path Method (CPM) helps to identify the critical path(s) in the project networks

E L E M E N T S O F

P R O J E C T P L A N N I N G

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Define project objective(s)

Identify activities

Make time estimates

Determine project completion time

Determine resource requirements to meet objective

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T H E P R O J E C T N E T W O R KNetwork consists of branches & nodes

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Branch

Node

N E T W O R K C O N S T R U C T I O N

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Nodes can be used to represent activities & events for points in time

Arrows represent activities & show precedence relationships

An event is the completion or beginning of an activity

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P R E R E Q U I S I T E S F O R C P MA project must have:

• well-defined jobs or tasks whose completion marks the end of the project;

• independent jobs or tasks;

• and tasks that follow a given sequence.

T Y P E S O F C P M

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CPM with a Single Time Estimate• Used when activity times are known with certainty• Used to determine timing estimates for the project,

each activity in the project, and slack time foractivities

CPM with Three Activity Time Estimates• Used when activity times are uncertain• Used to obtain the same information as the Single

Time Estimate model and probability information

Time-Cost Models• Used when cost trade-off information is a major

consideration in planning• Used to determine the least cost in reducing total

project time

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S T E P S I N T H E C P M W I T H S I N G L E T I M E E S T I M A T E D1. Activity Identification

2. Activity Sequencing and Network Construction

3. Determine the critical path

• From the critical path all of the project and activity timing information can be obtained

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C P M W I T H S I N G L E T I M E E S T I M A T EConsider the following consulting project:Activity Designation Immed. Pred. Time (Weeks)Assess customer's needs A None 2Write and submit proposal B A 1Obtain approval C B 1Develop service vision and goals D C 2Train employees E C 5Quality improvement pilot groups F D, E 5Write assessment report G F 1

Develop a critical path diagram and determine theduration of the critical path and slack times for allactivities.

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E X A M P L E 1 : F I R S T D R A W T H E N E T W O R K

Designation Immes. Pred. Time (weeks)

A None 2

B A 1

C B 1

D C 2

E C 5

F D,E 5

G F 1

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

E A R L Y T I M E S

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ES - earliest time activity can start

Forward pass starts at beginning of CPM network to determine ES times

EF = ES + activity time

L A T E T I M E S

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LF - latest time activity can finish & not delay project

Backward pass starts at end of CPM network to determine LS times

LS = LF - activity time

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A C T I V I T Y S L A C K• Activities on critical path have ES=LS & EF=LF

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E X A M P L E 1 : D E T E R M I N E E A R L Y S T A R T A N D E A R L Y F I N I S H T I M E S

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

Hint: Start with ES=0 and go forward in the network from A to G.

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E X A M P L E 1 : D E T E R M I N E L A T E S T A R T A N D L A T E F I N I S H T I M E S

LS=4LF=9

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

LS=14LF=15

LS=9LF=14

LS=7LF=9

LS=3LF=4

LS=2LF=3

LS=0LF=2

Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.

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E X A M P L E 1 : C R T I C A L P A T H A N D S L A C K

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A(2) B(1) C(1)

D(2)

E(5)

F(5) G(1)

LS=14LF=15

LS=9LF=14

LS=4LF=9

LS=7LF=9

LS=3LF=4

LS=2LF=3

LS=0LF=2

Duration=15 weeks

Slack=(7-4)=(9-6)= 3 Wks

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C P M W I T H T H R E E A C T I V I T Y T I M E E S T I M A T E S• Reflects uncertainty of activity times

a = optimistic estimatem = most likely time estimateb = pessimistic time estimate

where,

Mean (expected time): ETa + 4m + b

6=

22 )6

a -b( = sVariance:

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P R O B A B I L I S T I C N E T W O R K A N A LY S I SDetermine probability that project is completed within specifiedtime

where

TE = Expected completion time from CPM network

σ = project standard deviation along critical path

D = Desired completion date

Z = number of standard deviations D is from mean

Z = D - TE

cp2så

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E X A M P L E 2 : C P M W I T H T H R E E A C T I V I T Y T I M E E S T I M A T E S

TaskImmediate

Predecesors Optimistic Most Likely PessimisticA None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E,F 1 4 7I G,H 4 19 28

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E X A M P L E 2 : E X P E C T E D T I M E C A L C U L A T I O N

ET(A)= 3+4(6)+15

6

ET(A)=42/6=7Task

Immediate Predecesors

Expected Time

A None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

TaskImmediate

Predecesors Optimistic Most Likely PessimisticA None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E,F 1 4 7I G,H 4 19 28

Expected Time = Opt. Time + 4(Most Likely Time) + Pess. Time

6

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E X A M P L E 2 : T H E N E T W O R K

A(7)

B(5.333)

C(14)

D(5)

E(11)

F(7)

H(4)

G(11)

I(18)

Duration = 54 Days

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E X A M P L E 2 : P R O B A B I L I T Y E X E R C I S EWhat is the probability of finishing this project in less than 53 days?

Z = D - TE

cp2så

p(t < D)

TE = 54t

D=53

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E X A M P L E 2 : V A R I A N C E

Activity variance, = (Pessim. - Optim.

6)2 2s

Task Optimistic Most Likely Pessimistic VarianceA 3 6 15 4B 2 4 14C 6 12 30 16D 2 5 8E 5 11 17 4F 3 6 15G 3 9 27H 1 4 7 1I 4 19 28 16

(Sum the variance along the critical path.) s 2å = 41

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E X A M P L E 2 : C O N C L U S I O N

There is a 43.8% probability that this project will be completed in less than 53 weeks.

p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))

Z = D - T

=53- 54

41= -.156E

cp2så

TE = 54

p(t < D)

tD=53

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E X A M P L E 2 . 5 : W H A T I S T H E P R O B A B I L I T Y O F F I N I S H I N G T H I S P R O J E C T I N L E S S T H A N 5 6 D A Y S ?

tTE = 54

p(t < D)

D=56

Z = D - T

=56 - 54

41= .312E

cp2så

p(Z > .312) = .378, or 37.8 % (1-NORMSDIST(.312))

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T I M E A N D C O S T M O D E L S• Basic Assumption: Relationship between activity completion time and project cost.

• Time Cost Models: Determine the optimum point in time-cost tradeoffs.

• Activity direct costs

• Project indirect costs

• Activity completion times

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C O S T R E L A T E D T O P R O J E C T S• Project direct costs: cost associated with expediting the project

• Project indirect costs: cost associated with sustaining the project.

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P R O J E C T C R A S H I N G• Crashing is reducing project time by expending additional resources

• Crash time is an amount of time an activity is reduced

• Crash cost is the cost of reducing the activity time

• Goal is to reduce project duration at minimum cost

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E X A M P L E 3 : H O U S E B U I L D I N G N E T W O R K

1 2 4 6 7

3

5

12

80

4

12

44

4

Design house and obtain financing

Lay foundation

Order and receive materials

Select paint

Select carpet

Finish workBuild

house

Dummy

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N O R M A L A C T I V I T Y A N D C R A S H D A T A

1-2 12 7 $3,000 $5,000 5 $400

2-3 8 5 2,000 3,500 3 500

2-4 4 3 4,000 7,000 1 3,000

3-4 0 0 0 0 0 0

4-5 4 1 500 1,100 3 200

4-6 12 9 50,000 71,000 3 7,000

5-6 4 1 500 1,100 3 200

6-7 4 3 15,000 22,000 1 7,000

$75,000 $110,700

TotalNormal Crash Allowable CrashTime Time Normal Crash Crash Time Cost per

Activity (wks) (wks) Cost Cost (wks) Week

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E X A M P L E 3 : N E T W O R K W I T H C R A S H I N G C O S T• Activity 1-2 can be crashed a total of 5 weeks for $2000

• Crash cost per week = Total crash cost/Total crash time= $2,000/5 = $400 perweek

1 2 4 6 7

3

5

128 0

412

4 4

4

$7,000$7,000

$500

$3,000$400

$200 $200

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N O R M A L A N D C R A S H R E L A T I O N S H I P S

1242 6 8 10 140

1,000

3,000

4,000

5,000

7,000

2,000

6,000

$

Weeks

Crashed activity

Normal activity

Crash cost

Normal cost

Crash time Normal time

Slope = crash cost per week

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C R A S H I N G S O L U T I O N

1-2 12 7 5 $400 $2,000

2-3 8 5 3 500 1,500

2-4 4 3 0 3,000 0

3-4 0 0 0 0 0

4-5 4 1 0 200 0

4-6 12 9 3 7,000 21,000

5-6 4 1 0 200 0

6-7 4 3 1 7,000 7,000

12 $31,500

Normal Crash Crash Crash CrashingTime Time Time Cost per Cost

Activity (wks) (wks) Used Week Incurred

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C R A S H E D P R O J E C T

1 2 4 6 7

3

5

12 7

8 5

0

4 3

12 9

4 4

4 3

Original time Crashed times

A S S I G N M E N T # 1• Find Critical Path

• Find the project expected completion days

• Company will be paid 5.4 Millions for this project

• $150,000 bonus for finishing within 40 weeks

• $300,000 penalty for not finishing within 47 weeks

• What is the least expensive way of crashing some activities to reduce the project duration to 40 weeks

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I N F O # 1

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ActivityImmediat

e Predecess

ors

Time (Weeks)

a m b

A - 1 2 3B A 2 3.5 8C B 6 9 18D C 4 5.5 10E C 1 4.5 5F E 4 4 10G D 5 6.5 11H E,G 5 8 17I C 3 7.5 9J F,I 3 9 9K J 4 4 4L J 1 5.5 7M H 1 2 3N K,L 5 5.5 9

I N F O # 2

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Activity

Time (Weeks) Cost

Normal Crash Normal Crash

A 2 1 ฿180,000.00 ฿ 280,000.00

B 4 2 ฿320,000.00 ฿ 420,000.00

C 10 7 ฿620,000.00 ฿ 860,000.00

D 6 4 ฿260,000.00 ฿ 340,000.00

E 4 3 ฿410,000.00 ฿ 570,000.00

F 5 3 ฿180,000.00 ฿ 260,000.00

G 7 4 ฿900,000.00 ฿1,020,000.00

H 9 6 ฿200,000.00 ฿ 380,000.00

I 7 5 ฿210,000.00 ฿ 270,000.00

J 8 6 ฿430,000.00 ฿ 490,000.00

K 4 3 ฿160,000.00 ฿ 200,000.00

L 5 3 ฿250,000.00 ฿ 350,000.00

M 2 1 ฿100,000.00 ฿ 200,000.00

N 6 3 ฿330,000.00 ฿ 510,000.00

A S S I G N M E N T # 2• Ken Johnston, The data processing manager for Stanley Morgan Bank, is planning aproject to install a new management information system. He now is ready to start theproject, and wishes to finish in 20 weeks. After identifying the 14 separate activitiesneeded to carry out this project, as well as their precedence relationships andestimated durations (in weeks).

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Activity Immediate Predecessors Estimated Duration Estimated CostA - 6 ฿ 180,000.00

B - 3 ฿ 75,000.00

C - 4 ฿ 120,000.00

D A 4 ฿ 140,000.00

E B 7 ฿ 175,000.00

F C 4 ฿ 80,000.00

G C 6 ฿ 210,000.00

H D 3 ฿ 45,000.00

I A 5 ฿ 125,000.00

J E 4 ฿ 100,000.00

K F 3 ฿ 60,000.00

L G 5 ฿ 50,000.00

M H,I,J 6 ฿ 90,000.00

N K,L 5 ฿ 150,000.00

Q U E S T I O N S• Find Critical Path

• Find the earliest time, latest time, slack. Will he meet the deadline?

• Which activities he should focus more on?

• What if one of these activities delay by 2 weeks, I H, and J?

• Calculate the budget and schedule based on earliest/latest starttime

• What are the focused activities?

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A LT E R N A T I V E S Q U E S T I O N S• After 8 weeks, activities A, B, and C have been completed

with actual costs of $190,000, $70,000, and $150,000,respectively. Activities D, E, F, G, and I are under way, with thepercent completed being 40,50, 60, 25, and 20 percent,respectively. Their actual costs to date are $70000, $100000,$45000, $50000, and $35000, respectively. Construct aPERT/Cost report after week 8. Which activities should Keninvestigate to try to improve their performances

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