Chapter 03 Project Management

1
Operations Management
Chapter 3 Project Management
2
Outline

• Global Company Profile Bechtel
• The Importance of Project Management
• Project Planning
• Project Organization
• Project Manager
• Work Breakdown Structure (WBS)
• Project Scheduling

3
Outline - Continued

• Project Controlling
• Project Management Techniques Gantt Chart, PERT
  And CPM
• The Framework of PERT and CPM
• Network Diagrams and Approaches
• Activity-on-Node Example

4
Outline - Continued

• Determining the Project Schedule
• Forward Pass
• Backward Pass
• Calculating Slack Time and Identifying the
  Critical Path(s)
• Variability in Activity Times
• Three Time Estimates in PERT
• Probability of Project Completion

5
Outline - Continued

• Cost-time Trade-offs and Project Crashing
• A Critique of PERT and CPM
• Using Microsoft Project To Manage Projects
• Creating A Project Schedule Using MS Project
• Tracking Progress And Managing Costs Using MS
  Project

6
Learning Objectives

• Work breakdown structure (WBS)
• Gantt Chart, CPM and PERT
• AON Networks
• Forward and backward passes
• Critical path
• Variability in activity times
• Project crash

7
Bechtel Projects

• Restoring over 650 oil wells in Kuwait left
  ablaze or uncapped after Desert Storm
• Building 26 massive distribution centers in just
  two years for the internet company Webvan Group
• Constructing 30 high-security data centers
  worldwide for Equinix, Inc.
• Building and running a rail line between London
  and the Channel Tunnel (4.6 billion)
• Developing an oil pipeline from the Caspian Sea
  region to Russia (850 million)

8
Bechtel Projects

• Expanding the Dubai Airport in the UAE (600
  million), and the Miami Airport in Florida (2
  billion)
• Building liquid natural gas plants in Yemen 2
  billion) and in Trinidad, West Indies (1
  billion)
• Building a new subway for Athens, Greece (2.6
  billion)
• Constructing a natural gas pipeline in Thailand
  (700 million)
• Building a highway to link the north and south of
  Croatia (303 million)

9
Strategic Importance of Project Management

• Bechtel Kuwait Project
• 8,000 workers
• 1,000 construction professionals
• 100 medical personnel
• 2 helicopter evacuation teams
• 6 full-service dining halls
• 27,000 meals per day
• 40 bed field hospital

10
Strategic Importance of Project Management

• Microsoft Windows Longhorn Project
• hundreds of programmers
• millions of lines of code
• millions of dollars cost
• Ford Redesign of Mustang Project
• 450 member project team
• Cost 700-million
• 25 faster and 30 cheaper than comparable
  project at Ford

11
Project Characteristics

• Common, widely defined
• Single unit Uniqueness
• Team Work Well Organized
• Time / cost based
• Related activities in sequence(s)
• Difficult at planning
• Creativity Initiative, high labor skills
• Feedback Experience

12
Management of Projects

• Planning - goal setting, defining the project,
  team organization
• Scheduling - relates people, money, and supplies
  to specific activities and activities to each
  other
• Controlling - monitors resources, costs, quality,
  and budgets revises plans and shifts resources
  to meet time and cost demands

13
Management of Projects
Figure 3.1
14
Management of Projects
Figure 3.1
15
Management of Projects
Figure 3.1
16
Management of Projects
Figure 3.1
17
Management of Projects
Figure 3.1
18
Project Planning

• Establishing objectives
• Defining project
• Creating work breakdown structure
• Determining resources
• Forming organization

19
Project Organization

• Often temporary structure
• Uses specialists from entire company
• Headed by project manager
• Coordinates activities
• Monitors schedule and costs
• Permanent structure called matrix organization

20
A Sample Project Organization
Figure 3.2
21
Matrix Organization
22
The Role of the Project Manager
Receive highly visible, Responsible for making
sure that

• All necessary activities are finished in order
  and on time
• The project comes in within budget
• The project meets quality goals
• The people assigned to the project receive
  motivation, direction, and information

23
Work Breakdown Structure (WBS)

• Project
• Major tasks in the project
• Subtasks in the major tasks
• Activities (or work packages) to be completed

24
Work Breakdown Structure
Figure 3.3
25
Project Scheduling

• Identifying precedence relationships
• Sequencing activities
• Determining activity times costs
• Estimating material and worker requirements
• Determining critical activities

26
Project Management Techniques

• Gantt Chart
• Critical Path Method (CPM)
• Program Evaluation and Review Technique (PERT)

27
A Simple Gantt Chart
28
Service for A Delta Jet during layover
Figure 3.4
29
CPM and PERT

• Network techniques
• Developed in 1950s
• CPM by DuPont and Rand (1957)
• PERT by U.S. Navy (Polaris missile, 1958)
• Consider precedence relationships and
  interdependencies
• Each uses a different estimate of activity times

30
Activity-on-Node (AON) Network Conventions
Activity on Activity Node (AON)
Meaning
A comes before B, which comes before C
A
C
(a)
B
A
A and B must both be completed before C can start
(b)
C
B
B
B and C cannot begin until A is completed
A
(c)
C
Figure 3.5
31
Activity-on-Node (AON) Network Conventions
Activity on Activity Node (AON)
Meaning
C and D cannot begin until A and B have both been
completed
(d)
C cannot begin until both A and B are completed
D cannot begin until B is completed.
(e)
B and C cannot begin until A is completed. D
cannot begin until both B and C are completed.
(f)
32
AON Example
Milwaukee Paper Manufacturing'sActivities and
Predecessors
Table 3.1
33
AON Network for Milwaukee Paper
Figure 3.6
34
AON Network for Milwaukee Paper
Figure 3.7
35
AON Network for Milwaukee Paper
Figure 3.8
36
Exercise
A
C
F
S
G
B
D
E
37
Scheduling the ProjectCritical Path Analysis
Table 3.2
38
Scheduling the ProjectCritical Path Analysis
Notation used in Critical Path Analysis
Figure 3.10
39
Scheduling the ProjectCritical Path Analysis
Table 3.2
40
ES EF are determined in Forward Pass

• ES Max EF of all immediate predecessors
• EF ES Activity time

41
LS LF are determined in Backward Pass

• LF Min LS of all immediate following
  activities
• LS LF - Activity time

42
Computing Slack Time
After computing the ES, EF, LS, and LF times for
all activities, compute the slack or free time
for each activity

• Slack is the length of time an activity can be
  delayed without delaying the entire project

Slack LS ES or Slack LF EF
43
Scheduling the ProjectCritical Path Analysis
Critical Path characteristics

• Critical path activities have no slack time
• The critical path is the longest path through the
  network
• The critical path is the shortest time in which
  the project can be completed
• Any delay in critical path activities delays the
  project

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Computing Slack Time
Table 3.3
45
Critical Path for Milwaukee Paper
Figure 3.13
46
Exercise find the CP
A
C
F
S
G
B
D
E
47
Exercise - Answer
A
C
F
S
G
B
D
E
48
Variability in Activity Times

• CPM assumes one fixed time estimate for each
  activity and there is no variability in activity
  times
• PERT uses 3 activity time estimates, by allowing
  variability

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PERT Activity Times
???

• 3 time estimates
• Optimistic time (a)
• Pessimistic time (b)
• Most-likely time (m)
• Follow beta distribution
• Expected time t (a 4m b)/6
• Variance of time v (b - a) /6 2

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Computing Variance
Table 3.4
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Probability of Project Completion
Project variance is computed by summing the
variances of critical activities
s2 Project variance ?(variances of
activities on critical path)
p
52
Probability of Project Completion
53
Probability of Project Completion
PERT makes two more assumptions

• Activity times are statistically independent
• Total project completion times follow a normal
  probability distribution

54
Probability of Project Completion
Standard deviation 1.76 weeks
Figure 3.15
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Probability of Project Completion
What is the probability this project can be
completed on or before the 16 week deadline?
Where Z is the number of standard deviations the
due date lies from the mean
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Probability of Project Completion
What is the probability this project can be
completed on or before the 16 week deadline?
Where Z is the number of standard deviations the
due date lies from the mean
57
Probability of Project Completion
15 16
Time (weeks)
Figure 3.16
58
Probability of Project Completion
14 15
Time (weeks)
Figure 3.16
59
Variability of Completion Time for Noncritical
Paths

• Variability of times for activities on
  noncritical paths must be considered when finding
  the probability of finishing in a specified time
• Variation in noncritical activity may cause
  change in critical path

60
Six Steps of PERT CPM

• Define the project and prepare the work breakdown
  structure (WBS)
• Develop relationships among the activities -
  decide which activities must precede and which
  must follow others
• Draw the network connecting all of the activities
• Assign time and/or cost estimates to each
  activity
• Compute the longest time path through the network
  the critical path
• Use the network to help plan, schedule and
  control the project

61
Questions PERT CPM Can Answer

• When will the entire project be completed?
• What are the critical activities or tasks in the
  project? - the critical path
• Which are the noncritical activities?
• What is the probability the project will be
  completed by a specific date?
• Is the project on schedule, behind schedule, or
  ahead of schedule?
• Is the money spent equal to, less than, or
  greater than the budget?
• Are there enough resources available to finish
  the project on time?
• If the project must be finished in a shorter
  time, what is the way to accomplish this at least
  cost?

62
What Project Management Has Provided So Far

• The projects expected completion time is 15
  weeks
• There is a 71.57 chance the equipment will be in
  place by the 16 week deadline
• Five activities (A, C, E, G, and H) are on the
  critical path, cant be delayed.
• Three activities (B, D, F) have slack time and
  are not on the critical path, can be delayed
  (reallocate resource to crash CA)
• A detailed schedule of activities with starting
  and ending dates is available

63
Cost-Time Trade-Offs Project Crashing
It is common to face the following situations

• The project is behind schedule
• The completion time has been moved forward

Shortening the duration of the project in the
cheapest way is called project crashing
64
Factors to Consider When Crashing a Project

• Crashable activities or not?
• Critical activities or not?
• If the total crashing cost is cheapest?

65
Crash and Normal Times and Costs
Figure 3.18
66
Crashing The Project
Table 3.5
67
Steps in Project Crashing

• Compute the crash cost per time period
• Using current activity times, find the critical
  path
• If there is only one critical path, then select
  the activity on this critical path that (a) can
  still be crashed, and (b) has the smallest crash
  cost per period. (How about multi-CP?)
• Update all activity times. If the desired due
  date has been reached, stop. If not, return to
  Step 2.

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Critical Path And Slack Times For Milwaukee Paper
Figure 3.19
69
Advantages of PERT/CPM

• Especially useful when scheduling and controlling
  large projects
• Straightforward concept and not mathematically
  complex
• Graphical networks help to perceive relationships
  among project activities
• Critical path and slack time analyses help
  pinpoint activities that need to be closely
  watched
• Project documentation and graphics point out who
  is responsible for various activities
• Applicable to a wide variety of projects
• Useful in monitoring not only schedules but costs
  as well

70
Limitations of PERT/CPM

• Project activities have to be clearly defined,
  independent, and stable in their relationships
• Precedence relationships must be specified and
  networked together
• Time estimates tend to be subjective and are
  subject to fudging by managers
• There is an inherent danger of too much emphasis
  being placed on the longest, or critical, path