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PM0015, Project Management – PM0015 ,summer /spring 2012
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Master of Business Administration-MBA Semester 4
Project Management – PM0015 - 4 Credits
Assignment Set- 1 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions.
Q1. Discuss the advantages of Decision Tree.
A decision tree is a decision support tool that uses a tree-like graph or model of decisions
and their possible consequences, including chance event outcomes, resource costs, and
utility. It is one way to display an algorithm. Decision trees are commonly used in
operations research, specifically in decision analysis, to help identify a strategy most
likely to reach a goal. If in practice decisions have to be taken online with no recall under
incomplete knowledge, a decision tree should be paralleled by a probability model as a
best choice model or online selection model algorithm. Another use of decision trees is as
a descriptive means for calculating conditional probabilities.
Advantages
Amongst decision support tools, decision trees (and influence diagrams) have several advantages:
Decision trees:
Are simple to understand and interpret. People are able to understand decision tree models after a brief explanation.
Have value even with little hard data. Important insights can be generated based on experts describing a situation (its alternatives, probabilities, and costs) and their preferences for outcomes.
Use a white box model. If a given result is provided by a model, the explanation for the result is easily replicated by simple math.
Can be combined with other decision techniques. The following example uses Net Present Value calculations, PERT 3-point estimations (decision #1) and a linear distribution of expected outcomes (decision #2):
Example
Decision trees can be used to optimize an investment portfolio. The following example shows a portfolio of 7 investment options (projects). The organization has $10,000,000
available for the total investment. Bold lines mark the best selection 1, 3, 5, 6, and 7, which will cost $9,750,000 and create a payoff of 16,175,000. All other combinations would either exceed the budget or yield a lower payoff.[2]
Q2. Describe network analysis in project management
Network analysis, architecture, and design have traditionally been considered art, combining an individual's particular rules on evaluating and choosing network technologies; knowledge about how technologies, services, and protocols can be meaningfully combined; experience in what works and what doesn't;
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Q3. Describe the Project Evaluation and Review Technique (PERT).
Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) are
tools widely used in project scheduling. Both are based on network diagrams applicable
for both the planning and control aspects of production.
Q.4. Describe how you can display data using Gantt chart and Network Diagram Chart
Gantt Chart
The Gantt Chart is a horizontal bar chart that represents each task in the time scale of the
project. Each task entered in the project will be shown.
The Gantt Chart can be used to visually keep track of the tasks and also may be used to
identify important points about each task. Those tasks that together control the
completion date are known as the critical Path and are shown differently to highlight that
fact.
Q.5. List the steps involved in Steps involved in Autoregressive Model
An autoregressive model (AR) is also known in the filter design industry as an infinite
impulse response filter (IIR) or an all pole filter, and is sometimes known as a maximum
entropy model in physics applications. There is "memory" or feedback and therefore the
system can generate internal dynamics.
Q.6. Write a short note on project crashing using network analysis.
The procedure is developed to obtain the project-cost curve when there are linear
penalty costs for delays of certain key events in a project in addition to crashing
costs for activities. A linear programming formulation is given. From primal dual
considerations, the optimality conditions are derived and a network flow
interpretation to
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Master of Business Administration-MBA Semester 4
Project Management – PM0015 - 4 Credits
(Book ID: B1344)
Note: Each question carries 10 Marks. Answer all the questions.
Q.1 Explain Relationship between PERT & CPM. Also describe the framework
required for PERT & CPM
Business forecasting is a process used to estimate or predict future patterns using business
data. Some examples of business forecasting include estimating quarterly sales, product
demand, customer lifetime value and churn potential, inventory and supply-chain reorder
timing, workforce attrition, website traffic, and predicting exposure to fraud and risk.
Several powerful estimation functions are commonly used to perform business forecasting:
time series analysis, causal models, and regression analysis. Business forecasting supports
executives, analysts and end users in decision-making using decision support systems such
as business intelligence. It involves predicting the future outcome of various business
decisions. This includes the future of the business as a whole, the future of an existing or
proposed product or product line, and the future of the industry in which the business
operates, to name a few. Forecasting is used to answer important questions, such as:
How much profit will the business make?
How much demand will there be for a product or service?
How much will it cost to produce the product or offer the service?
How much money will the company need to borrow?
When and how will borrowed funds be repaid?
Businesses must understand and use forecasting in order to answer these important
questions. This helps the company prepare for the future. It also helps the organization
make plans that will lead to becoming a financially successful business. This article will
discuss the reasons financial forecasting is important to an organization.
Why is Forecasting Important to an Organization?
Financial forecasting is important for several reasons. First, it enables management to
change operations at the right time in order to reap the greatest benefit. It also helps the
company prevent losses by making the proper decisions based on relevant information.
Organizations that can create high quality and accurate forecasts are able to "see what
interventions are required to meet their business performance targets" (Vadasz).
Forecasting is also important when it comes to developing new products or new product
lines. It helps management decide whether the product or product line will be successful.
Forecasting prevents the company from spending time and money developing,
manufacturing, and marketing a product that will fail.
Business forecasting has always been one component of running an enterprise. However,
forecasting traditionally was based less on concrete and comprehensive data than on face-
to-face meetings and common sense. In recent years, business forecasting has developed
into a much more scientific endeavor, with a host of theories, methods, and techniques
designed for forecasting certain types of data. The development of information
technologies and the Internet propelled this development into overdrive, as companies not
only adopted such technologies into their business practices, but into forecasting schemes
as well. In the 2000s, projecting the optimal levels of goods to buy or products to produce
involved sophisticated software and electronic networks that incorporate mounds of data
and advanced mathematical algorithms tailored to a company's particular market conditions
and line of business.
Business forecasting involves a wide range of tools, including simple electronic
spreadsheets, enterprise resource planning (ERP) and electronic data interchange (EDI)
networks, advanced supply chain management systems, and other Web-enabled
technologies. The practice attempts to pinpoint key factors in business production and
extrapolate from given data sets to produce accurate projections for future costs, revenues,
and opportunities. This normally is done with an eye toward adjusting current and near-
future business practices to take maximum advantage of expectations.
In the Internet age, the field of business forecasting was propelled by three interrelated
phenomena. First, the Internet provided a new series of tools to aid the science of business
forecasting. Second, business forecasting had to take the Internet itself into account in
trying to construct viable models and make predictions. Finally, the Internet fostered vastly
accelerated transformations in all areas of business that made the job of business
forecasters that much more exacting. By the 2000s, as the Internet and its myriad functions
highlighted the central importance of information in economic activity, more and more
companies came to recognize the value, and often the necessity, of business forecasting
techniques and systems.
Business forecasting is indeed big business, with companies investing tremendous
resources in systems, time, and employees aimed at bringing useful projections into the
planning process. According to a survey by the Hudson, Ohio-based Answer Think
Consulting Group, which specializes in studies of business planning, the average U.S.
Company spends more than 25,000 person-days on business forecasting and related
activities for every billion dollars of revenue.
Companies have a vast array of business forecasting systems and software from which to
choose, but choosing the correct one for their particular needs requires a good deal of
investigation. According to the Journal of Business Forecasting Methods & Systems, any
forecasting system needs to be able to facilitate data-sharing partnerships between
businesses, accept input from several different data sources and platforms, operate on an
open architecture, and feature an array of analysis techniques and approaches.
Forecasting systems draw on several sources for their forecasting input, including
databases, e-mails, documents, and Web sites. After processing data from various sources,
sophisticated forecasting systems integrate all the necessary data into a single spreadsheet,
which the company can then manipulate by entering in various projections—such as
different estimates of future sales—that the system will incorporate into a new readout.
A flexible and sound architecture is crucial, particularly in the fast-paced, rapidly
developing Internet economy. If a system's base is rigid or inadequate, it can be impossible
to reconfigure to adjust to changing market conditions. Along the same lines, according to
the Journal of Business Forecasting Methods & Systems, it's important to invest in systems
that will remain useful over the long term, weathering alterations in the business climate.
Business forecasting systems often work hand-in-hand with supply chain management
systems. In such systems, all partners in the supply chain can electronically oversee all
movement of components within that supply chain and gear the chain toward maximum
efficiency. The Internet has proven to be a panacea in this field, and business forecasting
systems allow partners to project the optimal flow of components into the future so that
companies can try to meet optimal levels rather than continually catch up to them.
In integrated supply chain networks, for instance, a single company in the supply chain can
enter slight changes in their own production or purchasing schedules for all parties to see,
and the forecasting system immediately processes the effects of those changes through the
entire supply chain, allowing each company to adjust their own schedules accordingly.
With business relationships and supply chains growing increasingly complex—particularly
in the world of e-commerce, with heavy reliance on logistics outsourcing and just-in-time
delivery—such forecasting systems become crucial for companies and networks to remain
efficient.
PERT and Steps in the planning process
Complex projects require a series of activities, some of which must be performed
sequentially and others that can be performed in parallel with other activities. This
collection of series and parallel tasks can be modeled as a network.
In 1957 the Critical Path Method (CPM) was developed as a network model for project
management. CPM is a deterministic method that uses a fixed time estimate for each
activity. While CPM is easy to understand and use, it does not consider the time variations
that can have a great impact on the completion time of a complex project.
The Program Evaluation and Review Technique (PERT) is a network model that allows for
randomness in activity completion times. PERT was developed in the late 1950's for the
U.S. Navy's Polaris project having thousands of contractors. It has the potential to reduce
both the time and cost required to complete a project.
The Network Diagram
In a project, an activity is a task that must be performed and an event is a milestone
marking the completion of one or more activities. Before an activity can begin, all of its
predecessor activities must be completed. Project network models represent activities and
milestones by arcs and nodes. PERT originally was an activity on arc network, in which the
activities are represented on the lines and milestones on the nodes. Over time, some people
began to use PERT as an activity on node network. For this discussion, we will use the
original form of activity on arc.
The PERT chart may have multiple pages with many sub-tasks. The following is a very
simple example of a PERT diagram:
PERT Chart
The milestones generally are numbered so that the ending node of an activity has a higher
number than the beginning node. Incrementing the numbers by 10 allows for new ones to
be inserted without modifying the numbering of the entire diagram. The activities in the
above diagram are labeled with letters along with the expected time required to complete
the activity.
Steps in the PERT Planning Process
PERT planning involves the following steps:
1. Identify the specific activities and milestones.
2. Determine the proper sequence of the activities.
3. Construct a network diagram.
4. Estimate the time required for each activity.
5. Determine the critical path.
6. Update the PERT chart as the project progresses.
1. Identify Activities and Milestones
The activities are the tasks required to complete the project. The milestones are the events
marking the beginning and end of one or more activities. It is helpful to list the tasks in a
table that in later steps can be expanded to include information on sequence and duration.
2. Determine Activity Sequence
This step may be combined with the activity identification step since the activity sequence
is evident for some tasks. Other tasks may require more analysis to determine the exact
order in which they must be performed.
3. Construct the Network Diagram
Using the activity sequence information, a network diagram can be drawn showing the
sequence of the serial and parallel activities. For the original activity-on-arc model, the
activities are depicted by arrowed lines and milestones are depicted by circles or "bubbles".
If done manually, several drafts may be required to correctly portray the relationships
among activities. Software packages simplify this step by automatically converting tabular
activity information into a network diagram.
4. Estimate Activity Times
Weeks are a commonly used unit of time for activity completion, but any consistent unit of
time can be used.
A distinguishing feature of PERT is its ability to deal with uncertainty in activity
completion times. For each activity, the model usually includes three time estimates:
Optimistic time - generally the shortest time in which the activity can be completed.
It is common practice to specify optimistic times to be three standard deviations from
the mean so that there is approximately a 1% chance that the activity will be
completed within the optimistic time.
Most likely time - the completion time having the highest probability. Note that this
time is different from the expected time.
Pessimistic time - the longest time that an activity might require. Three standard
deviations from the mean are commonly used for the pessimistic time.
PERT assumes a beta probability distribution for the time estimates. For a beta distribution,
the expected time for each activity can be approximated using the following weighted
average:
Expected time = ( Optimistic + 4 x Most likely + Pessimistic ) / 6
This expected time may be displayed on the network diagram.
To calculate the variance for each activity completion time, if three standard deviation
times were selected for the optimistic and pessimistic times, then there are six standard
deviations between them, so the variance is given by:
[(Pessimistic - Optimistic ) / 6 ]2
5. Determine the Critical Path
The critical path is determined by adding the times for the activities in each sequence and
determining the longest path in the project. The critical path determines the total calendar
time required for the project. If activities outside the critical path speed up or slow down
(within limits), the total project time does not change. The amount of time that a non-
critical path activity can be delayed without delaying the project is referred to as slack time.
If the critical path is not immediately obvious, it may be helpful to determine the following
four quantities for each activity:
ES - Earliest Start time
EF - Earliest Finish time
LS - Latest Start time
LF - Latest Finish time
These times are calculated using the expected time for the relevant activities. The earliest
start and finish times of each activity are determined by working forward through the
network and determining the earliest time at which an activity can start and finish
considering its predecessor activities. The latest start and finish times are the latest times
that an activity can start and finish without delaying the project. LS and LF are found by
working backward through the network. The difference in the latest and earliest finish of
each activity is that activity's slack. The critical path then is the path through the network in
which none of the activities have slack.
The variance in the project completion time can be calculated by summing the variances in
the completion times of the activities in the critical path. Given this variance, one can
calculate the probability that the project will be completed by a certain date assuming a
normal probability distribution for the critical path. The normal distribution assumption
holds if the number of activities in the path is large enough for the central limit theorem to
be applied.
Since the critical path determines the completion date of the project, the project can be
accelerated by adding the resources required to decrease the time for the activities in the
critical path. Such a shortening of the project sometimes is referred to as project crashing.
6. Update as Project Progresses
Make adjustments in the PERT chart as the project progresses. As the project unfolds, the
estimated times can be replaced with actual times. In cases where there are delays,
additional resources may be needed to stay on schedule and the PERT chart may be
modified to reflect the new situation.
Benefits of PERT
PERT is useful because it provides the following information:
Expected project completion time.
Probability of completion before a specified date.
The critical path activities that directly impact the completion time.
The activities that have slack time and that can lend resources to critical path
activities.
Activity start and end dates.
Limitations
The following are some of PERT's weaknesses:
The activity time estimates are somewhat subjective and depend on judgment. In
cases where there is little experience in performing an activity, the numbers may be
only a guess. In other cases, if the person or group performing the activity estimates
the time there may be bias in the estimate.
Even if the activity times are well-estimated, PERT assumes a beta distribution for
these time estimates, but the actual distribution may be different.
Even if the beta distribution assumption holds, PERT assumes that the probability
distribution of the project completion time is the same as that of the critical path.
Because other paths can become the critical path if their associated activities are
delayed, PERT consistently underestimates the expected project completion time.
The underestimation of the project completion time due to alternate paths becoming critical
is perhaps the most serious of these issues. To overcome this limitation, Monte Carlo
simulations can be performed on the network to eliminate this optimistic bias in the
expected project completion time.
Q.2 Describe Time-Cost optimization Algorithm.
he process of shortening a project is called crashing and is usually achieved by adding
extra resources to an activity. The steps involved in the project crashing are the following
–
Step 1 – Schedule a project with all its activities at their normal duration as well as
identify the critical path and critical activities
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Q.3 Explain the importance of business forecasting.
Importance of Business Forecasting
Because of the variation of the economic and business conditions over time, managers
must find ways to keep abreast of the effects that such changes will have on
Q.5 Describe in brief the various pages of the task information form in the MS Project
software.
The management of resources is a major feature of MS Project. It is possible to see how
each one is being used and determine the times when they are under or over utilised.
Q.6. Describe how you can change the duration of a project task.
Change a task duration
1. If necessary, add the task to the project plan. See Create single and recurring
tasks for full instructions.
In the Duration column for the task, type the duration in minutes (m), hours (h),
days (d), weeks (w), or months (mo).
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2.
