Operations Management (MD021)

Project Management

Agenda
Projects and Project Management Tools and Technologies Network Diagrams Deterministic Time Estimates Project Crashing Probabilistic Time Estimates Risk Management

Projects and Project Management

Projects
JAN
Build A A Done

FEB

MAR

APR

MAY

JUN

Build B
B Done Build C C Done Build D Ship On time!

Projects are unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame.

The Life Cycle of Projects

Project Management
Project Management involves tasks of managing a project throughout its life cycle from its inception through to its completion
Often a team-based approach in companies

How is it different?
Limited time frame Narrow focus, specific objectives Less bureaucratic

Why is it used?
Special needs Pressures for new or improved products or services

Project Management takes place across the Project Life Cycle

Feasibility

Management

Concept

Planning

Execution Termination

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

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

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

Key Decisions
Which project(s) to implement?
Sometimes obvious whatever managers tell you to do Some companies have multiple, concurrent projects that they must decide between

Selecting a project manager?

Typically good to select someone with professional experience in managing projects Companies, however, often just assume that any manager can manage a project leading to BAD results

Project Manager typically should be skilled at managing projects

Responsible for:
Work Human Resources Communications Quality Time Costs

Key Decisions
Selecting the Project Team?
Managers often allocate their MEDIOCRE employees to projects In contrast, for success, project manager needs to have BEST people on project

Planning/Designing/Managing/Controlling project?
Many, many different techniques, tools, strategies

Terminate the project?

Sometimes, no matter how much money you sink in, a project will never be successful. Managers have a horrible tendency to be optimistic about completion; also, it is their butt that will get fired if project fails Need to kill a failing project as soon as possible saves the wasting of any more money

Ethical Issues in Project Management

Temptation to understate costs Temptation to withhold information
to get project approved to keep project from being terminated

Misleading status reports Falsifying records Comprising workers safety Approving substandard work

Tools and Technologies for Project Management

Tools and Technologies

What are the tools?
Gantt charts Work breakdown structure Network diagram Risk management

Technologies?
Software packages

Technology for Managing Projects

Computer aided design (CAD)
modeling/diagramming/flowcharting

Groupware (Lotus Notes, Groove)

team collaboration

Project management software

CA Super Project Harvard Total Manager MS Project Sure Track Project Manager Time Line

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

Gantt Charts are often used in project planning and scheduling Gantt Chart
Locate new facilities Interview staff Hire and train staff Select and order furniture Remodel and install phones Move in/startup
MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Gantt Chart in MS Project

Work Breakdown Structure

Project X

Level 1 Level 2 Level 3 Level 4

Work Breakdown Structure

Network Diagrams

PERT and CPM

PERT: CPM: Program Evaluation and Review Technique 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

Advantages of PERT
Forces managers to organize Provides graphic display of activities Identifies 4
Critical activities Slack activities
2
1 5 6

Limitations of PERT
Important activities may be omitted Precedence relationships may not be correct Estimates may 1 include a fudge factor May focus solely on critical path

4 2

142 weeks 3

The Network Diagram

Network (precedence) diagram
Activity-on-arrow (AOA) Activity-on-node (AON) WE COVER THIS ONLY

Activities
project steps that consumer resources and/or time

Events
starting and finishing of activities

The Network Diagram (contd)

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 Node

Order furniture

AON

Locate facilities

Furniture setup

1
Remodel

6
Move in

S
Hire and train

Interview

Deterministic Time Estimates

Time Estimates
Deterministic
Time estimates that are fairly certain

Probabilistic
Estimates of times that allow for variation

Example of Deterministic Task Times (AON)

8 weeks

3
9 weeks

4
1 week

2
4 weeks

Completion Time?
Critical Path? Slack Times along Non-Critical Path(s)?

Example of Solution for Deterministic Times

Critical Path

Path 1-2-3-4-5-6 1-2-5-6 1-3-5-6

Length
(weeks)

Slack 2 0 6

18 20 14

Algorithm for identifying project completion time, critical path, slack time
Network activities
ES: Early Start = earliest time an activity can start EF: Early Finish = earliest time an activity can finish LS: Late Start = latest time an activity can start LF: Late Finish = latest time an activity can finish

Used to determine
Expected project duration Slack time Critical path

Forward/Backward Method
Forward Pass
Start at left side of diagram For each beginning activity, ES = 0 For each activity, ES + activity time = EF For the following activity, ES = EF of preceding activity
Or, if multiple preceding activities, ES = maximum(EFs of all preceding activities)

Backward Pass
Start at right side of diagram Use the largest EF as the LF for all ending activities For each activity, LS = LF activity time For the preceding activity, LF = LS of following activity
Or, if multiple immediately following activities, LF = minimum(LSs of all following activities)

Solving an AON project network

Project Crashing

Project Crashing
Crashing a project involves paying more money to complete a project more quickly. Since the critical path determines the length of a project, it makes sense to reduce the length of activities on the critical path. CP activities should be reduced until the project is reduced to the desired length or you are paying more per day than you save. If you have multiple CPs, they should be shortened simultaneously.

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

Example of Crashing
S 6 a 5 c
Activity Normal Time Crash Time Cost/Day to Crash ============================================= a 6 5 $100 b 13 5 $400 c 5 4 $300

13 b

Critical Path = (a,b) Normal completion time = 19 Cost(18 days) = $100 Cost(17 days) = $500 Cost(16 days) = $900 Cost(10 days) = $3300

Probabilistic Time Estimates

Probabilistic Time Estimates Involve a Distribution of Times

to Activity start Optimistic time

tm

te

tp Pessimistic time

Most likely time (mode)

Typically, we assume that times follow a Beta probability distribution function

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

Expected Time
to + 4tm +tp = 6
te = expected time to = optimistic time tm = most likely time tp = pessimistic time

te

Variance of Time
2

(tp to)2 36
path

2 = variance to = optimistic time tp = pessimistic time

( variances of activities on path)

Example Using Probabilistic Time Estimates (AON)

Optimistic time Most likely time Pessimistic time

1-3-4 a 3-4-5 d 2-3-6 g

2-4-6 b 3-5-7 e 4-6-8 h

2-3-5 c 5-7-9 f 3-4-6 i

Path Probabilities
Z = Specified time Path mean Path standard deviation

Z indicates how many standard deviations of the path distribution the specified tine is beyond the expected path duration.
path

( variances of activities on path)

Example Using Probabilistic Time Estimates (AON)

S

3-4-5 a

2-3-4 b

Task a: te = (3 + 4(4) + 5)/6 = 24/6 = 4 Task b: te = (2 + 4(3) + 4)/6 = 18/6 = 3 Task a: 2act = (5-3)2/36 = 4/36 Task b: 2act = (4-2)2/36 = 4/36

Length of Path (a,b) = 4 + 3 = 7

2Path (a,b) = 4/36 + 4/36 = 8/36

Path (a,b) = sqrt(8/36) = 0.471

Question: Can we complete this project by Period 8?

Z = (8 7)/0.471 = 2.12 Prob{Complete by period 8} = 0.983

Risk Management

Project Risk Management

Risk: occurrence of events that have undesirable consequences
Delays Increased costs Inability to meet specifications Project termination

Risk Management
Identify potential risks Analyze and assess risks Work to minimize occurrence of risk Establish contingency plans