17-1 Project Management
Operations Management
William J. Stevenson
8th edition
17-2 Project Management
17-3 Project Management
Projects
JAN FEB MAR APR MAY JUN
Build A
A Done
Build B
B Done
Build C
C Done
On time!
Build D
Ship
Unique, one-time operations designed to accomplish
a specific set of objectives in a limited time frame.
17-4 Project Management
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
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
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
Project Management
What are the tools?
Work breakdown structure
Network diagram
Gantt charts
Risk management
17-8 Project Management
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 Project Management
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 Management
Project Manager
Responsible for:
Work Quality
Human Resources Time
Communications Costs
17-11 Project Management
Ethical Issues
Temptation to understate costs
Withhold information
Misleading status reports
Falsifying records
Comprising workers’ safety
Approving substandard work
17-12 Project Management
Project Life Cycle
Feasibility
Management
Planning
Concept
Execution
Termination
17-13 Project Management
Work Breakdown Structure
Figure 17.2
Project
Project X
X
Level 1
Level 2
Level 3
Level 4
17-14 Project Management
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 Project Management
The Network Diagram
Network (precedence) diagram
Activity-on-arrow (AOA)
Activity-on-node (AON)
Activities
Events
17-16 Project Management
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
Project Network – Activity on
17-17 Project Management
Arrow
Figure 17.4
Order
AOA furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move
in
Interview
Hire and
train
3
Project Network – Activity on
17-18 Project Management
Node
Figure 17.4
Order
furniture
Locate Furniture
2 setup
facilities
AON
1 6
Move
Remodel
in
S 5 7
Hire and
Interview
train
3 4
17-19 Project Management
Network Conventions
a
b
c a
c
b
a c
a c
b Dummy
activity
b d
17-20 Project Management
Time Estimates
Deterministic
Time estimates that are fairly certain
Probabilistic
Estimates of times that allow for variation
17-21 Project Management
Example 1
Figure 17.5
6 weeks
Deterministic 4
time estimates rd er e
O i tu r
Fur p
n 3 weeks
fu r
set
8 weeks 2
n i tu
u
Rem
ate s od e
re
c
Lo ilitie 11 weeks
l Move
fac in
1 5 6
In 1 week
er t ain
r
vi dt
4 weeks ew an
re
Hi 9 weeks
3
17-22 Project Management
Example 1 Solution
Critical Path
P a t h L e n g t h S la c k
( w e e k s )
1 - 2 - 3 - 4 - 5 1 - 86 2
1 - 2 - 5 - 6 2 0 0
1 - 3 - 5 - 6 1 4 6
17-23 Project Management
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 Project Management
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 Project Management
Probabilistic Estimates
Figure 17.8
to tm te tp
Activity Optimistic Most likely Pessimistic
start time time (mode) time
17-26 Project Management
Expected Time
te t
= o + 4t m +t p
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time
17-27 Project Management
Variance
σ 2 (t
= p – t o)2
36
σ 2 = variance
to = optimistic time
tp = pessimistic time
17-28 Project Management
Example 5
Optimistic Most likely Pessimistic
time time time
2-4-6
b
2- c
- 4
3-
-3
5
1 a
3-4-5 3-5-7 5-7-9
d e f
6
2- g
4 -
3-
-
3 i
6
4-6-8
h
17-29 Project Management
Path Probabilities
Specified time – Path mean
Z =
Path standard deviation
Z indicates how many standard deviations
of the path distribution the specified tine
is beyond the expected path duration.
17-30 Project Management
Example 6
17
Weeks
1.00
a-b-c
Weeks
10.0
d-e-f
Weeks
16.0
1.00
g-h-i
13.5 Weeks
17-31 Project Management
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
Time-Cost Trade-Offs:
17-32 Project Management
Crashing
Figure 17.11
Total
cost
Expected indirect costs
Shorten
Cumulative CRASH
cost of
crashing
Shorten
Optimum
17-33 Project Management
Example 7
10
6 b
a
2
f
5
9
c
e
4
d
17-34 Project Management
Advantages of PERT
Forces managers to organize
Provides graphic display of activities
Identifies 4
Critical activities 2
Slack activities 1 5 6
3
17-35 Project Management
Limitations of PERT
Important activities may be omitted
Precedence relationships may not4 be
correct
2
Estimates may include
a fudge factor
1 5 6
May focus solely
on critical path
142 weeks
3
Technology for Managing
17-36 Project Management
Projects
Computer aided design (CAD)
Groupware (Lotus Notes)
Project management software
CA Super Project
Harvard Total Manager
MS Project
Sure Track Project Manager
Time Line
17-37 Project Management
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
17-38 Project Management
Project Risk Management
Risk: occurrence of events that have
undesirable consequences
Delays
Increased costs
Inability to meet specifications
Project termination
17-39 Project Management
Risk Management
Identify potential risks
Analyze and assess risks
Work to minimize occurrence of risk
Establish contingency plans
17-40 Project Management
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
