Managing ProjectsChapter 10

What is a Project? A project has a unique purpose A project is temporary A project requires resources A project should have a primary sponsor or

customer A project involves uncertainty

What is Project Management? The application of knowledge, skills, tools,

and techniques to project activities in order to meet project requirements

Benefits of Project Management Better coordination among functional areas Ensure that tasks are completed even when there

is personnel turnover Minimize the need for continuous reporting Identification of realistic time limits Early identification of problems Improved estimating capability Easier to monitor success

Measures of Project Success Completed on-time Completed within budget Delivery of required specifications Acceptance by customer Minimum number of scope changes (change

orders)

What do Project Manager do? Manage the people and resources necessary to

meet scope, time, cost, and quality goals Reinforce excitement in the project Manage conflict Empower team members Encourage risk taking and creativity

Communicate the progress of the team with managers and customers

Building the Project Team Forming Storming Norming Performing

Quantitative Tools Gantt Charts Project Network Diagram

PERT uses AON (Activity on Node) methodology Many software programs (i.e., MS Project) use

boxes and arrows to display activities

Quantitative Analyses Constructing PERT diagrams and analyzing

the critical path Developing cost-time trade-off slopes Incorporating uncertainty into activity times

Constructing PERT DiagramsBaking a Cake ExampleActivity Code Immediate

PredecessorDuration (minutes)

Preheat oven A - 1.0

Measure ingredients B A 8.0

Mix ingredients for frosting C B 5.0

Mix ingredients for cake D B 5.0

Pour batter into cake pan E D 1.0

Bake F E 30.0

Cool cake G C, F 60.0

Frost cake H G 5.0

PERT

A1 B8

C5

D5 E1 F30

G60 H5

Note:* Notation represents the activity code and the expected duration (t)* Critical Path = A-B-D-E-F-G-H = 110 minutes

Notation for Critical Path AnalysisItem Symbol Definition

Activity duration t The expected duration of an activity

Early start ES The earliest time an activity can begin if all previous activities are begun at their earliest times

Early finish EF The earliest time an activity can be completed if it is started at its early start time

Late start LS The latest time an activity can begin without delaying the completion of the project

Late finish LF The latest time an activity can be completed if it is started at its latest start time

Total slack TS The amount of time an activity can be delayed without delaying the completion of the project

PERT

A1 B8

C5

D5 E1 F30

G60 H5

ES = 0EF = 0+1=1

ES = 1EF = 1+8=9

ES = 9EF = 9+5=14

ES = 9EF = 9+5=14

ES = 14EF = 15

ES = 15EF = 45

ES = 45 (larger of 45, 14)EF = 105

ES = 105EF = 110

Begin at 1st activity andmake ES = 0

ES = EFpredecessor (if more than 1 EFpredecessor then use the largest value)EF = ES + t

PERT

A1 B8

C5

D5 E1 F30

G60 H5

LS = 0LF = 1

LS = 1LF = 9 (smaller of 40, 9)

LS = 40LF = 45

LS = 9LF = 14

LS = 14LF = 15

LS = 15LF = 45

LS = (105-60)=45LF = LSsuccessor=105

LS = (LF-t) =(110-5)=105LF = EF = 110

Begin at last activity andmake LF=EF = 110

LF = LSsuccessor (If more than 1 LF = LSsuccessor then use the smallest value)LS = LF-t

PERTActivity ES EF LS LF TS

A 0 1 0 1 0

B 1 9 1 9 0

C 9 14 40 45 31

D 9 14 9 14 0

E 14 15 14 15 0

F 15 45 15 45 0

G 45 105 45 105 0

H 105 110 105 110 0

Total Slack (TS) = LS-ES or LF-EF

Activities that have zero slack are critical, meaning they cannot be delayed without delaying the project completion time

Gantt Chart See either:

Demonstration in MS Project Hardcopy distributed in class

Project Network Diagram(produced by MS Project)

See either: Demonstration in MS Project Hardcopy distributed in class

Tennis Tournament ExampleActivity Code Immediate Predecessor Estimated

Duration (days)

Negotiate for location A - 2

Contact seeded players B - 8

Plan promotion C A 3

Locate officials D C 2

Send RSVP invitations E C 10

Sign player contracts F B,C 4

Purchase balls and trophies G D 4

Negotiate catering H E,F 1

Prepare location I E,G 3

Tournament J H,I 2

Tennis Tournament ExamplePERT

Possible paths: A-C-D-G-I-J (16), A-C-F-H-J (12), A-C-E-I-J (20), A-C-E-H-J (18), B-F-H-J (15)Critical path = A-C-E-I-J (20)

Tennis Tournament ExamplePERTActivity ES EF LS LF TS

A

B

C

D

E

F

G

H

I

J

Gantt Chart See either:

Demonstration in MS Project Figure 10.8 in textbook

Project Network Diagram(produced by MS Project)

See either: Demonstration in MS Project Figure 10.9 in textbook

Trades-OffsCost and Time Cost and time are inversely related

As time to complete a project goes down, costs for the project go up

As time goes up, costs go down

Project Costs

Activity Crashing An activity is considered to be “crashed”

when it is completed in less time than is normal by applying additional labor or equipment

Determining the Impact of Activity Crashing To determine the impact of activity crashing

begin by identifying the Expedite-Cost Slope for each activity

To do this, a manager must identify “normal” and “crash” time and cost estimates

Tennis Tournament ExampleCost and Time Estimates

8201212J

210823I

-101011H

110934G

715834F

54020610E

6171112D

3131023C

4302268B

1015512A

Slope ($/day)CrashNormalCrashNormalCode

Expedite-Cost*Direct Costs ($)Time Estimate (Days)

8201212J

210823I

-101011H

110934G

715834F

54020610E

6171112D

3131023C

4302268B

1015512A

Slope ($/day)CrashNormalCrashNormalCode

Expedite-Cost*Direct Costs ($)Time Estimate (Days)

*Slope = Crash Cost – Regular Cost (15 – 5) = 10 = 10 Normal Duration – Crash Duration (2 – 1) 1

Activity Cost-Time Trade-off(Activity Code E)

Activity E: Normal Time = 10, Crash Time = 6, Normal Cost = $20, Crash Cost = $40)

Incorporating Uncertainty into Activity Times When a manager is unsure of the activity

duration times, he/she needs to estimate activity times using a Beta distribution

The Beta distribution allows the manager to develop a probable range of times in which the activity time will fall

Beta Distribution of Activity Duration

Beta Distribution Time Estimates Optimistic Time (A) – activity duration if no

problems occur Most Likely Time (M) – activity duration that

is most likely to occur Pessimistic Time (B) – activity duration if

extraordinary problems arise

Formulas Activity time (t) = (A + 4M + B)/6 Standard deviation (σ) = (B - A)/6 Variance (σ2) = (B – A)2/36

Assessing ProbabilityTennis Tournament Example Let’s say we plan to begin the tennis tournament

project on October 25th and plan to have it completed within 24 days (November 18th) because the tennis stadium is booked after that.

As a manager, you have estimated the optimistic, most likely, and pessimistic times for each activity

Now you want to find the probability that you will be able to finish the project in 24 days

Time Estimates Tennis Tournament Example

Time Estimates

Activity A M B t σ σ2

A 1 2 3 2.00 0.33 0.11

B 5 8 11 8.00 1.00 1.00

C 2 3 4 3.00 0.33 0.11

D 1 2 3 2.00 0.33 0.11

E 6 9 18 10.00 2.00 4.00

F 2 4 6 4.00 0.67 0.44

G 1 3 11 4.00 1.67 2.78

H 1 1 1 1.00 0.00 0.00

I 2 2 8 3.00 1.00 1.00

J 2 2 2 2.00 0.00 0.00

Time Estimates – Critical Path Tennis Tournament Example

Time Estimates Activity A M B t σ σ2 A 1 2 3 2.00 0.33 0.11 B 5 8 11 8.00 1.00 1.00 C 2 3 4 3.00 0.33 0.11 D 1 2 3 2.00 0.33 0.11 E 6 9 18 10.00 2.00 4.00 F 2 4 6 4.00 0.67 0.44 G 1 3 11 4.00 1.67 2.78 H 1 1 1 1.00 0.00 0.00 I 2 2 8 3.00 1.00 1.00 J 2 2 2 2.00 0.00 0.00

∑t = 2.00 + 3.00 + 10.00 + 3.00 + 2.00 = 20 days∑σ2 = 0.11 + 0.11 + 4.00 + 1.00 + 0.00 = 5.22 days∑σ = 0.33 + 0.33 + 2.00 + 1.00 + 0.00 = 3.66

Building Time DistributionTennis Tournament Example

Z = (X – μ)/σ

Z = (24 – 20)/√5.22

Z = 1.75

Z Table (p. 579 of textbook) shows that a Z value of 1.75 refers to a probability of (0.5000 – 0.4599)= 0.0401 or .04

Therefore, there is a 4% probability that the project would not be completed in 24 days