CH 09

Chapter 9
Managing Projects
Lecture Outline
Project Planning
Project Scheduling
Project Control
CPM/PERT
Probabilistic Activity Times
Microsoft Project
Project Crashing and Time-Cost Trade-off
Copyright 2011 John Wiley & Sons, Inc.
9-2
Project Management Process

Project
unique, one-time operational activity or effort
9-3
9-4
9-5
Project Elements
Objective
Scope
Contract requirements
Schedules
Resources
Personnel
Control
Risk and problem analysis
9-6
Project Team and Project Manager

Project team
made up of individuals from various areas and
departments within a company
Matrix organization
a team structure with members from functional
areas, depending on skills required
Project manager
most important member of project team
9-7
Scope Statement
Scope statement
a document that provides an understanding,
justification, and expected result of a project
Statement of work
written description of objectives of a project
9-8
Work Breakdown Structure

Work breakdown structure (WBS)
Breaks a project into components,
subcomponents, activities, and tasks
9-9
Work
Work Breakdown
Breakdown Structure
Structure for
for Computer
Computer Order
Order
Processing
Processing System
System Project
Project
9-10
Responsibility Assignment Matrix

Organizational Breakdown Structure (OBS)
a chart that shows which organizational units are
responsible for work items
Responsibility Assignment Matrix (RAM)

shows who is responsible for work in a project
9-11
Responsibility Assignment Matrix
9-12
Global and Diversity Issues in Project

Management
Global project teams are formed from different
genders, cultures, ethnicities, etc.
Diversity among team members can add an
extra dimension to project planning
Cultural research and communication are
important elements in the planning process
9-13
Project Scheduling
Steps
Define activities
Sequence activities
Estimate time
Develop schedule
Techniques
Gantt chart
CPM/PERT
Software
Microsoft Project
9-14
Gantt Chart
Graph or bar chart

Bars represent the time for each task
Bars also indicate status of tasks
Provides visual display of project schedule
Slack
amount of time an activity can be delayed without
delaying the project
9-15
Example of Gantt Chart

0
Month
4
10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials
Build house
Select paint
Select carpet
Finish work
Month
9-16
Project Control
Time management
Cost management
Performance management
Earned Value Analysis standard procedure to
numerically measure a projects progress
forecast its completion date and cost
measure schedule and budget variation
9-17
Project Control
Quality management
Communication
Enterprise project management
9-18
CPM/PERT
Critical Path Method (CPM)
DuPont & Remington-Rand
Deterministic task times
Activity-on-node network construction
Project Evaluation and Review Technique (PERT)

US Navy and Booz, Allen & Hamilton
Probabilistic task time estimates
Activity-on-arrow network construction
9-19
Project Network
Activity-on-node (AON)
nodes represent activities
arrows show precedence
relationships
Branch
1
Node
2
Activity-on-arrow (AOA)
arrows represent activities
nodes are events for points
in time
Event
completion or beginning of
an activity in a project
9-20
AOA Project Network for a House

3
Lay
foundation
3
Design house
and obtain
financing
Dummy
0
1
Order and
receive
materials
4
Select
paint
Build
house
3
1
Finish
work
1
Select
carpet
9-21
Concurrent Activities
Dummy
two or more activities cannot share same start and
end nodes
Lay foundation
Lay
foundation
3
Order material
(a) Incorrect precedence

relationship
3
Dummy
2
0
1
Order material
(b) Correct precedence
relationship
9-22
AON Network for House Building

Project
Lay
foundation
Build
house
2
2
Start
Activity Number
4
3
Activity Time
1
3
Design house
and obtain
financing
7
1
3
1
5
1
6
1
Order &receive
materials
Select
paint
Select
carpet
Finish work
9-23
Critical Path
2
2
Start
1
3
7
1
3
1
A:
B:
C:
D:
4
3
1-2-4-7
3 + 2 + 3 + 1 = 9 months
1-2-5-6-7
3 + 2 + 1 + 1 + 1 = 8 months
1-3-4-7
3 + 1 + 3 + 1 = 8 months
1-3-5-6-7
3 + 1 + 1 + 1 + 1 = 7 months
5
1
6
1
Critical path
Longest path through a

network
Minimum project
completion time
9-24
Activity Start Times

Start at 5 months
2
2
Start
4
3
Finish at 9 months
1
3
7
1
3
1
Start at 3 months
5
1
Finish
6
1
Start at 6 months
9-25
Node Configuration
Activity
number
Activity
duration
Earliest
start
Earliest
finish
Latest
start
Latest
finish
9-26
Activity Scheduling
Earliest start time (ES)
earliest time an activity can start
ES = maximum EF of immediate predecessors
Forward pass
starts at beginning of CPM/PERT network to determine
earliest activity times
Earliest finish time (EF)

earliest time an activity can finish
earliest start time plus activity time
EF= ES + t
9-27
Earliest Activity Start and Finish Times

Lay foundation
Build house
Start
Finish work
Design house
and obtain
financing
1
3
1
Order and
receive materials
6
5
1
Select carpet
Select paint
9-28
Activity Scheduling
Latest start time (LS)
Latest time an activity can start without delaying critical
path time
LS= LF - t
Latest finish time (LF)

latest time an activity can be completed without delaying
critical path time
LF = minimum LS of immediate predecessors
Backward pass
Determines latest activity times by starting at the end of
CPM/PERT network and working forward
9-29
Latest Activity Start and Finish Times

Lay foundation
Start
Build house
Finish work
Design house
and obtain
financing
Order and
receive materials
Select carpet
Select paint
9-30
Activity Slack
Activity
LS
ES
LF
EF
Slack S
*1
*2
*4
*7
* Critical Path
9-31
Probabilistic Time Estimates

Beta distribution
probability distribution traditionally used in CPM/PERT
9-32
P(time)
P(time)
Examples of Beta Distributions
Time
P(time)
Time
m=t
Time
9-33
Project with Probabilistic Time Estimates

Equipment
installation
Equipment testing
and modification
6,8,10
System
development
Start
3,6,9
Position
recruiting
2,4,12
Manual
testing
2,3,4
Job Training
1,3,5
3,4,5
System
training
3,7,11
2,4,6
System
testing
Final
debugging
10
1,4,7
Finish
11
1,10,13
System
changeover
Orientation
2,2,2
9-34
Activity Time Estimates

TIME ESTIMATES (WKS)
ACTIVITY
1
2
3
4
5
6
7
8
9
10
11
MEAN TIME
VARIANCE
6
3
1
2
2
3
2
3
2
1
1
8
6
3
4
3
4
2
7
4
4
10
10
9
5
12
4
5
2
11
6
7
13
8
6
3
5
3
4
2
7
4
4
9
0.44
1.00
0.44
2.78
0.11
0.11
0.00
1.78
0.44
1.00
4.00
9-35
Activity Early, Late Times & Slack

ACTIVITY
1
2
3
4
5
6
7
8
9
10
11
ES
EF
LS
LF
8
6
3
5
3
4
2
7
4
4
9
0.44
1.00
0.44
2.78
0.11
0.11
0.00
1.78
0.44
1.00
4.00
0
0
0
8
6
3
3
9
9
13
16
8
6
3
13
9
7
5
16
13
17
25
1
0
2
16
6
5
14
9
12
21
16
9
6
5
21
9
9
16
16
16
25
25
1
0
2
8
0
2
11
0
3
8
0
9-36
Earliest, Latest, and Slack

1 0
8 1
Start
2 0
6 0
3 0
3 2
10 13 17
8 9
7 9
Critical Path 2-5-8-11
4 8 13
5 16 21
5 6
3 6
6 3
4 5
16
3
Finish
16
1 0
9 9
4 12 16
13
11 16 25
9 16 25
7 3 5
2 14 16
9-37
Total Project Variance

2 = 22 + 52 + 82 + 112
= 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks
9-38
CPM/PERT With OM Tools
9-39
Probabilistic Network Analysis

Determine probability that project is
completed within specified time
x-
Z=
where
= tp = project mean time
= project standard deviation
x = proposed project time
Z = number of standard deviations that
x is from the mean
9-40
Normal Distribution of Project Time

Probability
= tp
Time
9-41
Southern Textile
What is probability that project is completed within 30 weeks?
P(x 30 weeks)
2 = 6.89 weeks
=
6.89
= 2.62 weeks
= 25 x = 30
Z = x-
= 30 - 25
2.62
= 1.91
Time (weeks)
From Table A.1, (appendix A) a Z score of 1.91 corresponds to a

probability of 0.4719. Thus P(30) = 0.4719 + 0.5000 = 0.9719
9-42
Southern Textile
What is probability that project is completed within 22 weeks?
P(x 22 weeks)
= 0.1271
0.3729
2 = 6.89 weeks
=
6.89
= 2.62 weeks
x = 22 = 25
Z = x-
= 22 - 25
2.62
= -1.14
Time (weeks)
From Table A.1, (appendix A) a Z score of 1.14 corresponds to a

probability of 0.3729. Thus P(22) = 0.5000 - 0.3729 = 0.1271
9-43
Microsoft Project
Popular software package for project
management and CPM/PERT analysis
Relatively easy to use
9-44
Microsoft Project
Click on Tasks
First step;
Start Date
9-45
Microsoft Project
Click on Format then Timescale
to scale Gantt chart.
Create precedence
relationships;
click on predecessor
activity, then
holding Ctrl Key,
click on successor
activity.
Precedence
relationships
Gantt chart;
click on View
to activate
9-46
Microsoft Project
Click on View then
Network Diagram
Critical path
in red
9-47
Microsoft Project Zoom View
9-48
Microsoft Project Task Information
Enter % completion
9-49
Microsoft Project Degree of Completion
Activities 1, 2 and 3
100% complete
Black bars show

degree of completion
9-50
PERT Analysis with Microsoft Project

Click on PERT Entry
Sheet to enter 3
time estimates
Click on PERT
calculator to compute
activity duration
9-51
9-52
9-53
Project Crashing
Crashing
reducing project time by expending additional
resources
Crash time
an amount of time an activity is reduced
Crash cost
cost of reducing activity time
Goal
reduce project duration at minimum cost
9-54
Project Network Building a House

4
2
8
12
7
4
12
3
4
5
4
6
4
9-55
Normal Time and Cost

vs. Crash Time and Cost
$7,000
$6,000
$5,000
Crash cost
Crashed activity
$4,000
Slope = crash cost per week
$3,000
Normal activity
$2,000
$1,000
Normal cost
Normal time
Crash time
|
2
|
4
|
6
|
8
|
10
|
12
|
14
Weeks
9-56
Project Crashing
ACTIVITY
1
2
3
4
5
6
7
NORMAL
TIME
(WEEKS)
CRASH
TIME
(WEEKS)
NORMAL
COST
12
8
4
12
4
4
4
7
5
3
9
1
1
3
$3,000
2,000
4,000
50,000
500
500
15,000
$5,000
3,500
7,000
71,000
1,100
1,100
22,000
$75,000
$110,700
CRASH
COST
TOTAL
ALLOWABLE
CRASH TIME
(WEEKS)
5
3
1
3
3
3
1
CRASH
COST PER
WEEK
$400
500
3,000
7,000
200
200
7,000
9-57
$500
$7000
4
2
8
7
4
12
$400
3
4
$3000
5
4
$200
$200
$500
$7000
2
8
12
$7000
7
4
$400
3
4
$3000
Project Duration:
36 weeks
6
4
TO
Project Duration:
31 weeks
Additional Cost:
$2000
FROM
$7000
12
5
4
$200
6
4
$200
9-58
Time-Cost Relationship
Crashing costs increase as project duration
decreases
Indirect costs increase as project duration
increases
Reduce project length as long as crashing costs
are less than indirect costs
9-59
Time-Cost Tradeoff
Minimum cost = optimal project time
Total project cost
Cost ($)
Indirect cost
Direct cost
Crashing
Time
Project duration
9-60

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6-61

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Chapter 9

Copyright 2011 John Wiley & Sons, Inc.

Project Management Process

Copyright 2011 John Wiley & Sons, Inc.

Project Management Process

Copyright 2011 John Wiley & Sons, Inc.

Project Management Process

Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc.

Project Team and Project Manager

Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc.

Work Breakdown Structure

Copyright 2011 John Wiley & Sons, Inc.

Responsibility Assignment Matrix

Responsibility Assignment Matrix (RAM)

Copyright 2011 John Wiley & Sons, Inc.

Responsibility Assignment Matrix

Copyright 2011 John Wiley & Sons, Inc.

Global and Diversity Issues in Project

Copyright 2011 John Wiley & Sons, Inc.

Graph or bar chart

Copyright 2011 John Wiley & Sons, Inc.

Example of Gantt Chart

Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc.

Project Evaluation and Review Technique (PERT)

AOA Project Network for a House

Copyright 2011 John Wiley & Sons, Inc.

(a) Incorrect precedence

Copyright 2011 John Wiley & Sons, Inc.

AON Network for House Building

Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc.

Longest path through a

Activity Start Times

Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc.

Earliest finish time (EF)

Copyright 2011 John Wiley & Sons, Inc.

Earliest Activity Start and Finish Times

Copyright 2011 John Wiley & Sons, Inc.

Latest finish time (LF)

Latest Activity Start and Finish Times

Copyright 2011 John Wiley & Sons, Inc.

Copyright 2011 John Wiley & Sons, Inc.

Probabilistic Time Estimates

Copyright 2011 John Wiley & Sons, Inc.

Examples of Beta Distributions

Project with Probabilistic Time Estimates

Activity Time Estimates

Copyright 2011 John Wiley & Sons, Inc.

Activity Early, Late Times & Slack

Copyright 2011 John Wiley & Sons, Inc.

Earliest, Latest, and Slack

Critical Path 2-5-8-11

Copyright 2011 John Wiley & Sons, Inc.

Total Project Variance

Copyright 2011 John Wiley & Sons, Inc.

CPM/PERT With OM Tools

Copyright 2011 John Wiley & Sons, Inc.

Probabilistic Network Analysis