Project management Lecture

2014 Lew Hofmann

Project Management

2014 Lew Hofmann

Managing Projects

Projects are usually large & infrequent or one-time. No two projects are the same. Projects are usually fairly long.

Several months to many years They Involve different people in different phases

Most people are only involved with a part of a project Even though a project may be under the overall

purview of a single department or group, other departments are often involved.

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Projects

The three main goals of project management are1. Complete the project on time or earlier.2. Complete the project on or under budget.3. Meet the specifications to the satisfaction of

the customer.

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Project Scope & Objectives

Defining a projects scope, time frame, allocated resources and objective, is essential.

An Objective Statement provides the purpose of the project.

A Specific time frame is established for starting and ending the project.

Necessary resources must be defined. Project costs and personnel allocations are

stated.

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Project Structures

Functional Structure: The team is housed in a specific functional area. Assistance from other areas must be negotiated.

Pure Project: Team members work exclusively for the project manager. (Best for large projects.)

Matrix Structure: A compromise between the functional and project structures. Members remain in various functional areas and the project manager coordinates across functional areas. Having two bosses (dual authority) can cause problems.

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Project Management TechniquesPERT CPM GERT

Program Evaluation and Review Technique PERT (Program Evaluation and Review Technique) is

utilized when activity times are uncertain (involved risk).

Critical Path Method CPM (Critical Path Method) is used when activity times

are known and certain.

Graphic Evaluation and Review Technique Rarely used, and then only in very complex projects. It overcomes many of the limitations of PERT and CPM Provides much more project flexibility.

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Project Management Steps1. Describe the Project (Defining all the tasks

that must be completed, and in what sequence.)2. Develop a Graph Model (diagram the

network showing task relationships)3. Develop an activity Schedule (Determine

the time estimates for each task)4. Analyzing cost-time trade-offs

(Determine the cost of each task.)5. Assess Risks (Probability analysis)

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Step 1Describe the project

What is the project?When does the project start and end?What activities make up the project?

Activities are defined as the smallest units of work that a project manager is expected to schedule and control.

...a managers project description should reflect only the level of detail that he or she needs in order to make scheduling and resource allocation decisions.

Task Ownership: Each activity must have an owner who is responsible for seeing that the work is accomplished.

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Relationshipsbetween Activities

A project is a sequence of activities. Large projects have interrelated sequences.

Except for the beginning activity/activities, every activity in a project has one or more activities that must be done immediately prior.

These are called Precedent (Pre-cee-ent) activitiesThey must be defined before the project begins.

EG: In order to bury a body you must first dig a hole.

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Step 2 Develop a Network Model

A Network Diagram visually displays the interrelated activities using nodes (circles) and arcs (arrows) that depict the relationships between activities.

It is a graphical diagram. For very large projects it may only be a numerical

arrangement of activities rather than graphical. Two types of Graphical Network Models

Activity On Arc (AOA) Activity On Node (AON) (We will use AON)

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Two Types of Network Models

Activity-on-Arc (AOA)

Activity-on-Node (AON)Activity Activity

LinkWe will use this!D E

Time Time

Activity E

Time

Activity D

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What AON Nodes look like.

The earliest you can complete an activity--determined by adding the activity time (duration) to the early start time.

This is the latest you can finish an activity without delaying project completion. It is the same as the Late Start time of the next activity. If there are two or more subsequent activities, this time is the same as the earliest of those Late Start times.

The is the earliest you can start an activity. It is determined by the early finish time of the precedent activity. If there are two or more precedent activities, this time is the same as precedent activity with the latest Early Finish time.

This is the Late-Finish time minus the activity duration.

Slack

Slack (S) is the difference, if any, between the early start (ES) and late start times (LS) or the early finish (EF) and late finish (EF) times.

S = LS - ES or S = LF - EF

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Early Start

Early FinishLate Finish

Late Start

ActivityName

Activity Duration

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Example: This homework Assignment

Early Start

Early FinishLate Finish

Late Start

Home-work #2

1 hour

SlackIf it takes one hour, the earliest you can complete this assignment is one hour after class ends.

One hour after your late start time.

The earliest you can start this assignment it is immediately after this class ends.

You can wait until one hour before the class in which it is due to start it; in this case one week from now.

The slack in this case would be one week, expressed in hours, since that is the unit of time used for the activities. It would be how long you could delay doing the assignment.

2014 Lew Hofmann

2014 Lew Hofmann

Precedent Relationships

Precedent relationships determine the sequence for accomplishing activities. They specify that any given activity cannot start until its preceding activity or activities have been completed.

In our AON approach, the nodes (circles) represent activities, and the arcs (arrows) represent the sequential relationships between them.

AON

S T U

Activity On Node approach

S precedes T which precedes U

Nodes are simplified in the following examples.

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Activity Relationships

T

US

T & U cannot begin until S has been completed.

S

TU

S & T must be completed before U can be started.

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S

T

U

V

U & V cant begin until S & Thave been completed.

S

T

U

V

U cannot begin until S & T have been completed. V cannot begin until T has been completed.

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S T V

U

T & U cannot begin until S has been completed; V cannot begin until both T & U have been completed.

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Logic Errors

C H

G

This is a logic error. C cannot be an immediate predecessor of both G &H if G is also an immediate predecessor of H.

Logic errors are hard to identify except on the network diagrams. If you see a triangle, then it is a logic error. Eliminate the short cut.

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St. Adolfs Hospital(A sample project)

ImmediateActivity Description Predecessor(s) Responsibility

A Select administrative and medical staff.B Select site and do site survey.C Select equipment.D Prepare final construction plans and layout.E Bring utilities to the site.F Interview applicants and fill positions in

nursing, support staff, maintenance, and security.

G Purchase and take delivery of equipment.H Construct the hospital.I Develop an information system.J Install the equipment.K Train nurses and support staff.

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A Select administrative and medical staff. 12B Select site and do site survey. 9C Select equipment. A 10D Prepare final construction plans & layout. B 10E Bring utilities to the site. B 24F Interview applicants and fill positions in A 10

nursing, support staff, maintenance, and security.

G Purchase and take delivery of equipment. C 35H Construct the hospital. D 40I Develop an information system. A 15J Install the equipment. E,G,H 4K Train nurses and support staff. F,I,J 6

St. Adolfs Hospital(A sample project)

ImmediateActivity Description Predecessor(s) Activity Times

*We wont assigning Responsibility data, but it is important in project management.

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St. Adolfs HospitalDiagramming the Network

FinishStart

A

B

C

D

E

F

G

H

I

J

K

Immediate Predecessors

A 12B 9C A 10D B 10E B 24F A 10G C 35H D 40I A 15J E,G,H 4K F,I,J 6

Activity Times (wks)

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St. Adolfs HospitalActivity Paths

FinishStart

A

B

C

D

E

F

G

H

I

J

K

Path Time (wks)

A-I-K 33A-F-K 28A-C-G-J-K 67B-D-H-J-K 69B-E-J-K 43

Paths are sequences of activities between a projects start and finish.

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St. Adolfs Critical Path

FinishStart

A

B

C

D

E

F

G

H

I

J

KPath Time (wks)


Project Expected Time is 69 wks.

The longest path is the critical path!

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Activity Time EstimatesPERT or CPM ?

CPM (Critical Path Method) Activity times are certain, so only one time estimate for each activity is needed. Decision making under Certainty

PERT (Program Evaluation and Review Technique) is used when activity times are uncertain. (Decision making under risk) It requires three time estimates for each activity.(Best case, most likely time, and worst case)

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PERTsThree time-estimates

OPTIMISTIC TIME: Best time if everything goes perfectly when doing the activity.

REALISTIC TIME: Most likely time for the activity PESSIMISTIC TIME: A worst-case situation

B + 4M + PExpected Time = -------------------

6In this example, the most likely time is given a weight of four, and the other two times (pessimistic and optimistic) are each given weights of one.

Risky activity times make the project length risky, so there is a need for risk assessment based on the probability distribution of times. (Standard deviation and variance are computed by the software.)

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Activity slack is the maximum length of time that an activity can be delayed without delaying the entire project.

It is the difference between the earliest time we can start an activity and the latest time we can start the activity without delaying the project.

The critical path activities have zero slack.For the St. Adolfs Hospital project, 69 weeks is the

project length because 69 weeks is the longest path.Project delays beyond the projected completion date

often involve penalties.

Activity Slack

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Earliest Start Time (ES) for an activity is the earliest finish time of the immediately preceding activity.

Earliest Finish Time (EF) for an activity is its earliest start time plus how long it takes to do it (activity time).

Latest Start Time (LS) is the latest you can finish the activity minus the activitys estimated duration.

Latest Finish Time (LF) is the latest start time plus the activity time. The latest finish time is the same as the latest start time of the activity activity

which follows it. (Latest start and finish times for each activity are computed starting at the projects last activity completion time and working forward.)

Slack is the difference between the Earliest Start and Latest start times for an activity (or earliest finish and latest finish times.)

Activity Start and Finish Times

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Earliest Start and Earliest Finish Times

K6

C10

G35

J4

H40

B9

D10

E24

I15

FinishStart

A12

F10

0

Earliest start time

12

Earliest finish time

0 9

9 33

9 19 19 59

22 5712 22

59 63

12 27

12 22 63 69

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2014 Lew Hofmann

Earliest Start and Earliest Finish Times

Critical Path

The Critical Path takes 69 weeks

K6

C10

G35

J4

H40

B9

D10

E24

I15

FinishStart

A12

F10

0 9

9 33

9 19 19 59

22 5712 22

59 63

12 27

12 22 63 690 12

Path Time (wks)


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2014 Lew Hofmann

K6

C10

G35

J4

H40

B9

D10

E24

I15

FinishStart

A12

F10

0 9

9 33

9 19 19 59

22 5712 22

59 63

12 27

12 22 63 690 12

Latest Start and Latest Finish Times(You start with the last activity and work toward the first activity)

48 63

53 63

59 63

24 59

19 59

35 59

14 24

9 19

2 14

0 9

Latestfinishtime

63 69Lateststarttime

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2014 Lew Hofmann

Activity Slack Analysis

K6

C10

G35

J4

H40

B9

D10

E24

I15

FinishStart

A12

F10

0 9

9 33

9 19 19 59

22 5712 22

59 63

12 27

12 22 63 690 12

48 63

53 63

59 63

24 59

19 59

35 59

14 24

9 19

2 14

0 9

63 69

Slack is the difference between LS and ES or EF and LF

Node Duration ES LS Slack

A 12 0 2 2B 9 0 0 0C 10 12 14 2D 10 9 9 0E 24 9 35 26F 10 12 53 41G 35 22 24 2H 40 19 19 0I 15 12 48 36J 4 59 59 0K 6 63 63 0

2014 Lew Hofmann

2014 Lew Hofmann

Analyzing Cost-Time Trade-Offs.

There are always cost-time trade-offs in project management.You can completing a project early by hiring more

workers or running extra shifts.There are often penalties if projects extends beyond

some specific date, and a bonus may be provided for early completion.

Crashing a project means finishing the project early by expediting one or more activities. Not all activities can be shortened.

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Project Costs

Total Project Costs = direct costs + indirect costs + penalty costs

Direct costs include labor, materials, and any other costs directly related to project activities.

Indirect costs include administration, depreciation, financial, and other variable overhead costs. These can be reduced by reducing total project time. The shorter the duration of the project, the lower the indirect

costs will be. Penalty costs are essentially late fees incurred for

going over the projected due date.

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We do cost analysis to determine the project schedule that minimizes total project costs.

When crashing an activity or project, extra money is spent on direct costs, but money is saved on indirect costs and possible penalties.

A minimum-cost schedule is determined by starting with the normal project time schedule and shortening activities along the critical path until the costs of crashing (direct costs) start to exceed the savings in indirect costs and penalty costs. New critical paths usually appears while doing this.

Minimizing Costs

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a. Determine the projects critical path(s).b. Find the activity or activities on the critical path(s)

with the lowest cost of crashing (shortening) per week.c. Reduce the time for this activity until

a. it cannot be further reduced,b. or another path becomes critical,c. or the increase in direct costs exceed the savings that result

from lower indirect costs.d. Repeat this process until the total project costs are no

longer decreasing. Sophisticated project management software will do this.

St. Adolfs HospitalMinimum Cost Schedule

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K6

C10

G35

J4

H40

B9

D10

E24

I15

FinishStart

A12

F10

0 9

9 33

9 19 19 59

22 5712 22

59 63

12 27

12 22 63 690 12

48 63

53 63

59 63

24 59

19 59

35 59

14 24

9 19

2 14

0 9

63 69

Of the five critical-path activities, the contractor says D and H cannot be shortened. J is the least costly to shorten at $1000 a week. Contractor says it can be shortened to 1 week.

The project manager must now compare the cost of shortening J by 3 weeks ($3,000 in additional direct costs) with savings in indirect costs, to see if the total cost is lower.

Shorten from 4 weeks to 1 week

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2014 Lew Hofmann

Assessing Risks

Risk is a measure of the probability (and consequences) of not completing a project on time.

A major responsibility of the project manager at the start of a project is to develop a risk-management plan.

A Risk-Management Plan identifies the key risks to a projects success and prescribes ways to circumvent them.

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Causes of Project Risk

1. Service/Product Risks: If the project involves a new service or product, several risks can arise. Market risk comes from competition. Technological risk can arise from technology advances

made once the project has started, rendering obsolete the technology chosen for service or product.

Legal risk from liability suits or other legal action.2. Project Team Problems: Poor member selections

and inexperience, lack of cooperation, etc.3. Operations Risk: Information inaccuracy, miss-

communications, bad project timing, weather

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ANALYZING PROBABILITIES

What is the probability that our sample project will finish in 69 weeks as scheduled?100% (Why?)Because we used CPM!

(This means we were certain of all of our activity times.) If we werent certain, we should have used PERT

You only do risk analysis if you use PERT

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PERT and PROBABILITIES

With PERTs three time-estimates, we get a mean(average) time and a variance for each activity and each path.

We also get a project mean time and variance. In order to compute probabilities (assuming a

normal distribution) we need the activity means and variances. Most computer packages calculate this for you.

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Probability of Project Completion

The probability of a project being completed by a given date is a function of the mean activity times and variances along the critical path(s).

The probability of a specific activity being completed by a given date is a function of the mean activity times and variances along the longest path leading up to that activity.

If you have more than one critical path, focus on the path with the greatest variance.A near-critical path may also be a problem,

depending on the mean and variance of its activities.

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Distributions & Probability

A Beta distribution is often used for the three estimates of each activity This allows skewed distributions.

Optimistic------Most likely -----------------------Pessimistic(3 ------------- 5 ---------------------------------- 11)

Normal distributions are needed for probabilities. A distribution of activity-means is a normal

distribution, even though each activity time may be a beta distribution.

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Beta Distribution

Meanma b Time

P

r

o

b

a

b

i

l

i

t

y

PessimisticOptimistic

Each activity may have its three time estimates skewed (Beta Distribution), but the path along which this activities lie has a normal distribution and thus a mean and variance.

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Figuring Probabilities

Assume a PERT project critical path takes 40 days, and that the variance of the critical path is 2.147 You wish to know the probability of the project going over 42 days.

Compute the standard deviation of the critical path. The square root of the variance of 2.147 = Std. Dev. = 1.465 POM/QM software gives you the variance of the critical path.

Compute the Z value: Z = (absolute time difference) / Std. Dev.In this example, Z = (42 days - 40 days) / 1.465 = 1.365

Look up the Z value of 1.365 in a Normal Distribution table to get the probability of the project taking 42 days.

Subtract it from 100% to get the probability of going over 42.

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Look up the Z value (1.365) in the table of normal distribution.(In this case you need to interpolate between the Z values of .9313 and .9147).9139 or 91.39% is the probability of the project taking 42 days.Thus the probability of going over 42 days is 100 - 91.39 = 8.61%

.9139

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Project duration (weeks)40 42

Probability of completing the project in 42 weeks is 91.39%

Project Length (critical path) is 40 weeks

Normal distribution of variances along the critical path. Sum of its variances = 2.147Std. Dev. = 1.465 weeks

Probability of exceeding 42 weeks is 8.61%

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2 = (variances of activities along critical path) z = T C22 = 1.78 + 1.78 + 2.78 + 5.44 + 0.11 = 11.89

z = 72 6911.89

What is the Probability of it taking 72 weeks?Critical Path = B - D - H - J K = 69 weeksT = 72 weeks C = 69 weeks

St. Adolfs HospitalA 69-week Project

Look up Z value in normal distribution tableZ = 0.870

Critical Path Variance

z = 33.44818

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Look up the Z value (0.870) in the table of normal distribution..8078 or 80.78% is the probability of the project taking 72 wks.Going over 72 weeks would be 100 80.78 = 19.22%

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Project duration (weeks)69 72

Probability oftaking 72 weeks is 0.8078 or 80.78%

Length of critical path is 69 weeks

Normal distribution: Mean = 69 weeks; = 3.45 weeks

Probability of exceeding 72 weeks is 0.1922 or 19.22%

St. Adolfs HospitalProbability of Completing Project On Time

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Resource-Related Problems

Padded Time Estimates: Many time-estimates come with a built-in cushion that management may not realize.

Latest Date Mentality: The tendency for employees (and students) to procrastinate until the last moment before starting.

Failure to Deliver Early, even if the work is completed before the latest finish date.

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Path Mergers occur when two or more activity paths combine at a particular node. Both paths must be completed up to this point, which will eliminate any built-up slack.

Multitasking is the performance of multiple project activities at the same time. Work on some activities is often delayed for other work.

Loss of Focus by a manager can happen if the critical path changes frequently.

Failure to have all the needed resources on time.

Resource-Related Problems

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PERT / CPM ADVANTAGES

Enables Resource Management & AllocationYou can move slack resources to critical points

Focuses on your critical activitiesVisualize relationships (The big picture)Enables Cost analysis

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PERT / CPM PITFALLS

Can be complex to set up relationships in large project

Time estimates are often biased.Near critical paths are easily overlooked.

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GERT(Graphical Evaluation and Review Technique)

Gives more flexibility to project planning than PERT/CPMAllows any individual activity to either be

completed or not completed (Succeed or fail) PERT & CPM both require all activities be successfully

completed. GERT does not require this. GERT Allows looping back (redoing an activity) or

skipping an activity entirely. There are computerized GERT packages.

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GERT(Graphical Evaluation and Review Technique)

What the book says: It is a procedure for the study of stochastic networks composed of EXCLUSIVE-OR, INCLUSIVE-OR, and AND nodes (vertices) and multi-parameter branches (transmittances or edges).The total concept of stochastic networks, the transformation, and the evaluation method is labeled GERT.

GERT is a means of handling stochastic networks with logical nodes. The GERT analysis is finished when the system is represented by an equivalent one-branch function yielding the system's failure or success probabilities as time dependent probabilities.

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Sample Problem

What is the probability of completing the project in 23 weeks?

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2014 Lew Hofmann

Sample Problem

Finish

Start

A

4.00.04.0

4.08.0

D

12.04.08.0

16.020.0

E

6.59.09.0

15.515.5

G

4.515.515.5

20.020.0

C

3.55.55.5

9.09.0

F

9.05.56.5

14.515.5

B

5.50.00.0

5.55.5

2014 Lew Hofmann

2014 Lew Hofmann 2014 Lew Hofmann

Sample ProblemThis is how the POM-QM software package draws the solution. Note that D is not an immediate predecessor of E, but A is an immediate predecessor of E. The program draws the line from A through D to E.

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Sample Problem

Using the Normal Distribution appendix, we find that the probability of completing the project in 23 weeks or less is 0.9357.

Critical path = 20 weeks

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2014 Lew Hofmann

Homework #2 Due next week

Problem 1 is on the next slide. Draw the network and solve it manually using the AON method. No credit if you use the computer.

Problems 2 and 3 are on the following slides.

Use the POM/QM software for these last two problems.

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Problem 1Do manually (no computer)

A project has the following precedence relationships and activity times. Draw the network diagram and calculate the total slack for each activity. Which activities are on the critical path?

Activity Activity Time (wks) Immediate Predecessor(s)A 4 B 9 C 5 AD 15 B,CE 12 BF 4 DG 8 EH 7 F,G

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Activities for Problem #2 Time PrecedentsA Demolition of present structures 3 NoneB Excavation and filling of site 2 AC Forming & pouring of concrete 2 BD Construction of steel skeleton 3 CE Construction of concrete structure 2 CF Construction of exterior skin 1 D,EG Installation of plumbing 3 EH Installation of electrical 3 D,EI Installation of heating & cooling 3 D,E,FJ Construction of interior flooring 3 IK Lighting fixtures and finish work 2 J

PROBLEM 2 (Use POM/QM)1. There are logic errors in the data. You will have to run the program in order

to find them. Then make the appropriate corrections and re-run the problem to get the correct solution. Identify the critical path and its length.

2. Include 4 printouts: Input screen, PERT/CPM results table, Precedence graph and the Gantt chart of early & late times.

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2014 Lew Hofmann

Homework, Problem 3 (next slide)

This is a PERT problem so it has three time estimates. Use the POM/OM package. Answer the following questions:

a. Identify the critical path(s).b. How long is the path nearest to the critical path?c. What is the probability that the project will take longer than 38

days? (Table of Normal Probabilities is on the last slide.)d. What is the probability that the near critical path will take longer

than 38 days?e. Include 5 printouts: Input screen, PERT/CPM results table,

Precedence graph, Task time computations, and the Gantt chart of early & late times.

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Activity Precedent Optimistic Most Likely PessimisticA - 6 7 8B A 4 4 4C A 5 6 8D B 8 10 10E B 7 10 15F C 9 9 13G C 7 7 7H D 4 6 8I E, F 6 9 11J G 8 9 10K H, I, J 3 5 6

Problem #3

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2014 Lew Hofmann

2014 Lew Hofmann

Sample POM/QM Input Table Printout

Note that this is CPM since there is only one time estimate for each activity. You will need to change the method for PERT.

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Sample POM/QM Solution Table printout

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Sample PERT/CPMPrecedence Graph Printout

Note that the software does not add start blocks or end blocks.

Note also that there is a logic error. D should not be an immediate predecessor of F.

In your homework computer problem, you will have more than one ending node. This is not an error. Connect them to an End Block if it will help you visualize it.

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Sample GanttChart Printout

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POM/QM Printing Hint

Avoid using the print screen button on the bottom left of the screen or in the file menu.

Screen prints are small and very hard to read.Select the File pull-down menu and use the Print option.

You can then indicate which items you wish to print and get a much better output.

OPTION: Download the free program Jing. It is available for Mac and PC, and what I use for the printouts on my PPT slides.

http://www.techsmith.com/jing.html

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Project management Lecture