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Chapter 10. Projects. Learning Objectives. Explain what project management is and why it is important. Identify the different ways projects can be structured in an organization. Describe how project objectives are set. - PowerPoint PPT Presentation
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Projects
1. Explain what project management is and why it is important.
2. Identify the different ways projects can be structured in an organization.
3. Describe how project objectives are set.4. Describe how projects are organized into
components using work breakdown structure5. Determine the “critical path” for a project.6. Demonstrate how to “crash,” or reduce the
length, of a project.
Building: a ship, a satellite, an oil rig, and a nuclear plant.
Developing: computer programs, an advertising campaign, a new product, a new process, and training materials.
Implementing: new technologies and work procedures..
LO 1LO 1
Project: a series of related jobs usually directed toward some major output and requiring a significant period of time to perform
Project management: the management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project
LO 1LO 1
LO 1LO 1
The 4The 4thth dimension: dimension:
client client satisfactionsatisfaction
LO 1LO 1
Project Life CycleProject Life Cycle: changing patterns of : changing patterns of resource usage and level of activity resource usage and level of activity over the course of the project over the course of the project
LO 1LO 1
Stages of a Conventional Project:Stages of a Conventional Project:◦ Slow beginningSlow beginning◦ Buildup of sizeBuildup of size◦ PeakPeak◦ Begin a declineBegin a decline◦ TerminationTermination
LO 1LO 1
LO 1LO 1
Time distribution of project effort is Time distribution of project effort is characterized by slow-rapid-slowcharacterized by slow-rapid-slow
LO 1LO 1
Risk during project life cycleRisk during project life cycle◦With most projects there is some With most projects there is some
uncertainty about the ability to meet uncertainty about the ability to meet project goalsproject goals
◦Uncertainty of outcome is greatest at Uncertainty of outcome is greatest at the start of a projectthe start of a project
◦Uncertainty decreases as the project Uncertainty decreases as the project moves toward completionmoves toward completion
LO 1LO 1
Try to avoid the “90-90 rule of project Try to avoid the “90-90 rule of project management”: management”:
The first 90% of the project The first 90% of the project takes 90% of the time, the takes 90% of the time, the last 10% takes the other last 10% takes the other 90%.90%.
LO 1LO 1
What does this rule really What does this rule really mean?mean?
LO 1LO 1
During the life cycle cycle, project During the life cycle cycle, project management is accomplished through management is accomplished through the use of processes such as:the use of processes such as: Initiating, planning, executing, controlling, Initiating, planning, executing, controlling,
and closing and closing Many of these processes are iterative in Many of these processes are iterative in
nature because the project is being nature because the project is being progressively elaboratedprogressively elaborated
LO 1LO 1
An Alternate View*An Alternate View*Stage 1: Excitement – Euphoria Stage 1: Excitement – Euphoria Stage 2: Disenchantment Stage 2: Disenchantment Stage 3: Search for the Guilty Stage 3: Search for the Guilty Stage 4: Punishment of the Innocent Stage 4: Punishment of the Innocent Stage 5: Distinction for the UninvolvedStage 5: Distinction for the Uninvolved
*Author unknown but believed to have *Author unknown but believed to have perished in stage 4perished in stage 4
LO 1LO 1
LO 2LO 2
Pure project Functional project Matrix project
LO 2LO 2
Advantages◦ The project manager has full authority◦ Team members report to one boss◦ Shortened communication lines◦ Team pride, motivation, and commitment are high
Disadvantages◦ Duplication of resources◦ Organizational goals and policies are ignored◦ Lack of technology transfer◦ Team members have no functional area "home"
LO 2LO 2
LO 2LO 2
Advantages◦ A team member can work on several projects◦ Technical expertise maintained in functional area◦ Functional area is “home” after project completed◦ Critical mass of specialized knowledge
Disadvantages◦ 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
LO 2LO 2
LO 2LO 2
Advantages◦ Better communications between functional areas◦ Project manager held responsible for success◦ Duplication of resources is minimized◦ Functional “home” for team members◦ Policies of the parent organization are followed
Disadvantages◦ Too many bosses◦ Depends on project manager’s negotiating skills◦ Potential for sub-optimization
LO 2LO 2
Why Set Project Objectives To provide direction for project
activities To enable measuring results against
prior exceptions Resource usage (manpower,
materials, etc.) ◦ Schedule integrity ◦ Quality of work
To determine specific goals which will provide maximum effectiveness of project activities
LO 3LO 3
Requirements for Project Objectives Achievable (time, resources, staff) Understandable (vs. complex) Specific (vs. general, vague
statements) Tangible (“deliverables”) Measurable (resources, schedule,
quality) Consistent (with strategy, programs,
policies, procedures) Assignable (department or individual)
LO 2LO 2
Example: D.U. Singer Project Title: Permanent Antiseptic Production Start-
Up Objectives:
◦ Develop a comprehensive plan for the production of a new, permanent antiseptic
◦ Complete development and testing of a manufacturing process that: Meets all current FDA, EPA, and OSHA regulations as
well as internal specifications produces 95% yield of product (full packaged) at a
level of 80% of full production goal of 10 million liters per year
LO 2LO 2
Be careful of the jargon!
LO 2LO 2
Statement of work (SOW): a written description of the objectives to be achieved
Task: a further subdivision of a project◦ Usually shorter than several months◦ Performed by one group or organization
Work package: a group of activities combined to be assignable to a single organizational unit
LO 4LO 4
Project milestones: specific events on the project
Work breakdown structure (WBS): defines the hierarchy of project tasks, subtasks, and work packages
Activities: pieces of work that consume time◦ Defined within the context of the WBS
LO 4LO 4
LO 4LO 4
LO 4LO 4
Program: New Product Introduction
1.0 Project 1: Engineering Development 1.1 Task 1: Run pilot test 1.2 Task 2: Review process costs
and efficiencies 1.3 Task 3: Prepare Capital
Equipment List
2.0 Project 2: Market Survey 2.1 Task 1: Complete Market Survey 2.2 Task 2: Analyze Survey Results 2.3 Task 3: Prepare Marketing Plan
Work Breakdown StructureWork Breakdown Structure
LO 4LO 4
3.03.0 Project 3: Manufacturing Start-up Project 3: Manufacturing Start-up 3.1 3.1 Task 1: Task 1: Install and Test New Install and Test New Equipment Equipment 3.23.2 Task 2: Task 2: Establish Manufacturing Establish Manufacturing
Procedures Procedures 3.3 3.3 Task 3: Task 3: Detailed Testing of Initial Detailed Testing of Initial
Output Output
4.0 Project 4: Sales Force Training 4.0 Project 4: Sales Force Training 4.14.1 Task 1: Task 1: Select Sales People Select Sales People 4.2 4.2 Task 2: Task 2: Select Distributors Select Distributors 4.3 4.3 Task 3:Task 3: Train Sales Force and Train Sales Force and
Distributors Distributors
Work Breakdown StructureWork Breakdown Structure
LO 4LO 4
Charts are useful because their visual presentation is easily understood
Software is available to create the charts Gantt chart: a bar chart showing both the
amount of time involved and the sequence in which activities can be performed
LO 4LO 4
LO 4LO 4
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
LO 5LO 5
A 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.
LO 5LO 5
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 for activities
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 LO 5LO 5
1. Identify each activity to be done and estimate how long it will take
2. Determine the requires sequence and construct a network diagram
3. Determine the critical path4. Determine the early start/finish and late
start/finish schedule
LO 5LO 5
ActivityActivity DesignationDesignation Immed. Pred.Immed. Pred. Time (Weeks)Time (Weeks)Assess customer's needsAssess customer's needs AA NoneNone 22Write and submit proposalWrite and submit proposal BB AA 11
Obtain approvalObtain approval CC BB 11
Develop service vision and goalsDevelop service vision and goals DD CC 22Train employeesTrain employees EE CC 55Quality improvement pilot groupsQuality improvement pilot groups FF D, ED, E 55Write assessment reportWrite assessment report GG FF 11
Develop a critical path diagram and determine Develop a critical path diagram and determine the duration of the critical path and slack times the duration of the critical path and slack times
for all activities. for all activities. LO 5LO 5
A(2)A(2) B(1)B(1) C(1)C(1)
D(2)D(2)
E(5)E(5)
F(5)F(5) G(1)G(1)
AA NoneNone 22
BB AA 11
CC BB 11
DD CC 22
EE CC 55
FF D,ED,E 55
GG FF 11
Act.Act. Imed. Pred. TimeImed. Pred. Time
LO 5LO 5
Activities on the critical path cannot be delayed without delaying the completion of the project
There are two paths:A – B – C – D – F – G: 12 weeksA – B – C – E – F – G: 15 weeks Activity D can be delayed by up to 3
weeks without delaying the project The longest path is critical – why?
LO 5LO 5
ES=9ES=9EF=14EF=14
ES=14ES=14EF=15EF=15
ES=0ES=0EF=2EF=2
ES=ES=22
EF=EF=33
ES=3ES=3EF=4EF=4
ES=4ES=4EF=9EF=9
ES=4ES=4EF=6EF=6
A(2)A(2) B(1)B(1) C(1)C(1)
D(2)D(2)
E(5)E(5)
F(5)F(5) G(1)G(1)
Hint: Start with ES=0 Hint: Start with ES=0 and go forward in the and go forward in the network from A to G.network from A to G.
Hint: Start with ES=0 Hint: Start with ES=0 and go forward in the and go forward in the network from A to G.network from A to G.
LO 5LO 5
ES=9ES=9EF=14EF=14
ES=14ES=14EF=15EF=15
ES=0ES=0EF=2EF=2
ES=2ES=2EF=3EF=3
ES=3ES=3EF=4EF=4
ES=4ES=4EF=9EF=9
ES=4ES=4EF=6EF=6
A(2)A(2) B(1)B(1) C(1)C(1)
D(2)D(2)
E(5)E(5)
F(5)F(5) G(1)G(1)
LS=14LS=14LF=15LF=15
LS=9LS=9LF=14LF=14
LS=4LS=4LF=9LF=9
LS=7LS=7LF=9LF=9
LS=3LS=3LF=4LF=4
LS=2LS=2LF=3LF=3
LS=0LS=0LF=2LF=2
Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.
Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.
LO 5LO 5
ES=9ES=9EF=14EF=14
ES=14ES=14EF=15EF=15
ES=0ES=0EF=2EF=2
ES=2ES=2EF=3EF=3
ES=3ES=3EF=4EF=4
ES=4ES=4EF=9EF=9
ES=4ES=4EF=6EF=6
A(2)A(2) B(1)B(1) C(1)C(1)
D(2)D(2)
E(5)E(5)
F(5)F(5) G(1)G(1)
LS=14LS=14LF=15LF=15
LS=9LS=9LF=14LF=14
LS=4LS=4LF=9LF=9
LS=7LS=7LF=9LF=9
LS=3LS=3LF=4LF=4
LS=2LS=2LF=3LF=3
LS=0LS=0LF=2LF=2
Duration=Duration=15 weeks15 weeks
Slack=(7-4)=(9-6)= 3 WksSlack=(7-4)=(9-6)= 3 Wks
LO 5LO 5
Activity Description Immed. Preds.
A Build internal components -
B Modify roof and floor -
C Construct collection stack A
D Pour concrete and install frame
A, B
E Build high-temperature burner
C
F Install pollution control system
C
G Install air pollution device D, E
H Inspect and test F, G
LO 5LO 5
StartStart
AA
BB
CC
DD
EE
FF
GG
HH
Arrows show Arrows show
precedence precedence
relationshipsrelationships
22
33
22
44
44
33
55
22
Start is a “Dummy” Start is a “Dummy” activity with 0 durationactivity with 0 duration
LO 5LO 5
Latest Latest FinishFinish
ESES
LSLS
EFEF
LFLF
Earliest Earliest FinishFinish
Latest Latest StartStart
Earliest Earliest StartStart
Activity Activity Nam
eNam
eActivity Activity DurationDuration
LO 5LO 5
StartStart
AA
BB
CC
DD
EE
FF
GG
HH
Arrows show Arrows show
precedence precedence
relationshipsrelationships
LO 5LO 5
Four paths in the network:Path 1: Start – A – C – F – H: 9 weeksPath 2: Start – A – C – E – G – H: 15 weeksPath 3: Start – A – D – G – H: 13 weeksPath 4: Start – B – D – G – H: 14 weeks
Path 2 is critical
LO 5LO 5
A, C, E, G, and H are on the critical path and so they have 0 slack
B is on path 4, so its slack is 15 – 14 = 1 D is on paths 3 and 4, so its slack is 15 –
Max (13,14) = 1 F is on path 1, so its slack is 15 – 9 = 6 An activity can be delayed by its slack and
not delay the project completion
LO 5LO 5
Slack=0Slack=0
StartStart
AA
BB
CC
DD
FF
FF
GG
HHHH
13131313
22
15151515
HHGG
8888
55
13131313
HHFF
441010
33
771313
HHCC
2222
22
4444
HHEE
4444
44
8888
HHDD
3344
44
7788
HHBB
0011
33
3344
HHAA
0000
22
2222
HH0000
00
0000
Slack=0Slack=0 Slack=0Slack=0
Slack=0Slack=0
Slack=0Slack=0
Slack=6Slack=6
Slack=1Slack=1Slack=1Slack=1
StartStart
LO 5LO 5
Great Valley General HospitalGreat Valley General HospitalGreat Valley General HospitalGreat Valley General Hospital
A Build internal componentsA Build internal components
B Modify roof and floorB Modify roof and floorC Construct collection stackC Construct collection stackD Pour concrete and install D Pour concrete and install
frameframeE Build high-temperature E Build high-temperature
burnerburnerF Install pollution control F Install pollution control
systemsystemG Install air pollution deviceG Install air pollution device
H Inspect and testH Inspect and test
1 2 3 4 5 6 7 8 9 10 1112 13 1 2 3 4 5 6 7 8 9 10 1112 13 1415 161415 16
LO 5LO 5
LO 5LO 5
LO 5LO 5
A-C-F-G: 38 A-C-E-G: 35 A-B-D-F-G: 38 A-B-D-E-G: 35
Paths A-C-F-G and A-B-D-F-G are both critical
LO 5LO 5
If a single time estimate is not reliable, then use three time estimates◦ a = Optimistic (Minimum)◦ b = Pessimistic (Maximum)◦ m = Most likely
Allows us to obtain a probability estimate for completion time for the project
LO 5LO 5
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
LO 5LO 5
ET(A)= ET(A)= [[3+4(6)+15]/63+4(6)+15]/6
ET(A)= ET(A)= [[3+4(6)+15]/63+4(6)+15]/6
ET(A)=42/6=7ET(A)=42/6=7ET(A)=42/6=7ET(A)=42/6=7
TaskImmediate
PredecesorsExpected
TimeA 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
6Expected Time =
Opt. Time + 4(Most Likely Time) + Pess. Time
6LO 5LO 5
TaskImmediate
PredecesorsExpected
TimeA None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18
ET(B)=32/6=5.333ET(B)=32/6=5.333ET(B)=32/6=5.333ET(B)=32/6=5.333
ET(B)= ET(B)= [[2+4(4)+14]/62+4(4)+14]/6
ET(B)= ET(B)= [[2+4(4)+14]/62+4(4)+14]/6
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
6Expected Time =
Opt. Time + 4(Most Likely Time) + Pess. Time
6LO 5LO 5
TaskImmediate
PredecesorsExpected
TimeA None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18
ET(C)= ET(C)= [[6+4(12)+30]/66+4(12)+30]/6
ET(C)= ET(C)= [[6+4(12)+30]/66+4(12)+30]/6
ET(C)=84/6=14ET(C)=84/6=14ET(C)=84/6=14ET(C)=84/6=14
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
6Expected Time =
Opt. Time + 4(Most Likely Time) + Pess. Time
6LO 5LO 5
NetworkNetwork
A(7)A(7)
BB(5.333)(5.333)
C(14)C(14)
D(5)D(5)
E(11)E(11)
F(7)F(7)
H(4)H(4)
G(11)G(11)
I(18)I(18)
Duration = 54 DaysDuration = 54 Days
LO 5LO 5
Probability ExerciseProbability Exercise
What is the probability of finishing this project in What is the probability of finishing this project in less than 53 days?less than 53 days?
What is the probability of finishing this project in What is the probability of finishing this project in less than 53 days?less than 53 days?
p(t < D)p(t < D)
TTE E = 54= 54
Z = D - TE
cp2
Z = D - TE
cp2
ttD=53D=53
LO 5LO 5
Activity variance, = (Pessim. - Optim.
6)2 2Activity variance, = (
Pessim. - Optim.
6)2 2
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 (Sum the variance along the along the
critical pathcritical path.).) 2 = 41 2 = 41
a m ba m b
LO 5LO 5
There is a 43.8% probability that this project will There is a 43.8% probability that this project will be completed in less than 53 weeks.be completed in less than 53 weeks.
There is a 43.8% probability that this project will There is a 43.8% probability that this project will be completed in less than 53 weeks.be completed in less than 53 weeks.
p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))
Z = D - T
=53- 54
41= -.156E
cp2
Z = D - T
=53- 54
41= -.156E
cp2
TTE E = 54= 54
p(t < D)p(t < D)
ttD=53D=53
LO 5LO 5
What is the probability that the project duration will exceed 56 weeks?
What is the probability that the project duration will exceed 56 weeks?
LO 5LO 5
ttTTE E = 54= 54
p(t < D)p(t < D)
D=56D=56
Z = D - T
=56 - 54
41= .312E
cp2
Z = D - T
=56 - 54
41= .312E
cp2
p(Z > .312) = p(Z > .312) = .378.378, or , or 37.8 %37.8 % (1-NORMSDIST(.312)) (1-NORMSDIST(.312)) p(Z > .312) = p(Z > .312) = .378.378, or , or 37.8 %37.8 % (1-NORMSDIST(.312)) (1-NORMSDIST(.312)) LO 5LO 5
LO 5LO 5
LO 5LO 5
Two critical paths:Two critical paths:A-C-F-G: var. = 11 8/9 = 11.89A-C-F-G: var. = 11 8/9 = 11.89A-B-D-F-G var. = 10 2/9 = 10.33A-B-D-F-G var. = 10 2/9 = 10.33Take larger var.Take larger var.
0.1922 prob So
87.089.11
3835
Weeks35in Finishing ofy Probabilit
2
cp
ETDZ
LO 5LO 5
Basic assumption: Relationship between activity completion time and project costTime cost models: Determine the optimum point in time-cost tradeoffs◦ Activity direct costs◦ Project indirect costs◦ Activity completion times
LO 6LO 6
1. Prepare a CPM-type network diagram2. Determine the cost per unit of time to
expedite each activity3. Compute the critical path4. Shorten the critical path at the least cost5. Plot project direct, indirect, and total-cost
curves and find the minimum-cost schedule
LO 6LO 6
LO 6LO 6
LO 6LO 6
LO 6LO 6
Assumes indirect cost is a constant Assumes indirect cost is a constant $10 up to 8 days and increases $10 up to 8 days and increases $5/day thereafter$5/day thereafter
8 days is lowest total cost 8 days is lowest total cost
LO 6LO 6
Four paths in the network:Path 1: Start – A – C – F – H: 9 weeksPath 2: Start – A – C – E – G – H: 15 weeksPath 3: Start – A – D – G – H: 13 weeksPath 4: Start – B – D – G – H: 14 weeks
Path 2 is critical Assume $0 indirect costs Desire to crash this project by two
weeks at the smallest direct cost
LO 6LO 6
Act. NT CT NC CC CC/WK CP?A 2 1 22,000 22,750 750 YB 3 1 30,000 34,000 2000 NC 2 1 26,000 27,000 1,000 YD 4 3 48,000 49,000 1,000 NE 4 2 56,000 58,000 1,000 YF 3 2 30,000 30,500 500 NG 5 2 80,000 84,500 1,500 Y H 2 1 16,000 19,000 3,000 Y Total: 308,000 to complete the
project in 15 weeks – called the normal cost
LO 6LO 6
Select the activity with smallest crash cost per week that is on the critical path – activity A at a cost of $750
Start – B – D – G – H is also critical (14 wks)
Crash G by 1 week at a cost of $1,500 to reduce the project by an additional week (vs. crashing C and D at a combined cost of $2,000)
Cost to complete project in 13 weeks = $308,000 + 750 + 1,500 = $310,250
LO 6LO 6
In addition to scheduling each task, must assign resources
Software can spot over-allocation◦ Allocations exceed resources
Must either add resources or reschedule◦ Moving a task within slack can free up resources
LO 1LO 1
Actual progress on a project will be different from the planned progress◦ Planned progress is called the baseline
A tracking Gantt chart superimposes the current schedule onto a baseline so deviations are visible
Project manager can then manage the deviations
LO 1LO 1