Project Management

Chapter 9
Project Management
Operations
Operations Management
Management -- 55thth Edition
Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga
Lecture Outline
Project Planning
Project Scheduling
Project Control
CPM/PERT
Probabilistic Activity Times
Project Crashing and Time-Cost
Trade-of
9-2
What is a Project?
Project
unique, one-time operational activity or efort
Examples
constructing houses, factories, shopping malls, athletic

stadiums or arenas
developing military weapons systems, aircrafts, new ships
launching satellite systems
constructing oil pipelines
developing and implementing new computer systems
planning concert, football games, or basketball tournaments
introducing new products into market
9-3
Project Elements
Objective
Scope
Contract requirements
Schedules
Resources
Personnel
Control
Risk and problem analysis
9-4
Project Management Process
Project planning
Project scheduling
Project control
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
9-5
Project Scope
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
Work breakdown structure
breaks down a project into components,

subcomponents, activities, and tasks
9-6
Work Breakdown Structure for Computer Order

Processing System Project
9-7
Organizational Breakdown Structure
a chart that shows which organizational units are

responsible for work items
Responsibility Assignment Matrix
shows who is responsible for work in a project
9-8
Project Scheduling
Steps
Define activities
Sequence
activities
Estimate time
Develop schedule
Techniques
Gantt chart
CPM
PERT
Microsoft Project
9-9
Gantt Chart
Graph or bar chart with a bar for each
project activity that shows passage of
time
Provides visual display of project
schedule
Slack
amount of time an activity can be delayed

without delaying the project
9-10
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
9-11
Project Control
Time management
Cost management
Quality management
Performance management
Earned Value Analysis
a standard procedure for numerically measuring a

projects progress, forecasting its completion date and
cost and measuring schedule and budget variation
Communication
Enterprise project management
9-12
CPM/PERT
Critical Path Method (CPM)
DuPont & Remington-Rand (1956)

Deterministic task times
Activity-on-node network construction
Project Evaluation and Review Technique

(PERT)
US Navy, Booz, Allen & Hamilton

Multiple task time estimates
Activity-on-arrow network construction
9-13
Project Network
Activity-on-node (AON)
nodes represent activities,

and arrows show
precedence relationships
Activity-on-arrow (AOA)
arrows represent activities

and nodes are events for
points in time
Event
Node
1
Branch
completion or beginning
of an activity in a project
9-14
AOA Project Network for

a House
Lay
foundation
3
Design house
and obtain
financing
3
2
Dummy
0
1
Order and
receive
materials
4
Select
paint
Build
house
3
1
Finish
work
1
Select
carpet
9-15
Concurrent Activities
Lay foundation
Lay
foundation
Order material
(a) Incorrect precedence

relationship
3
Dummy
2
0
1
Order material
(b) Correct precedence
relationship
9-16
AON Network for House

Building Project
Lay foundations
Build house
4
3
2
2
Start
Finish work
7
1
1
3
Design house
and obtain
financing
3
1
Order and receive

materials
5
1
6
1
Select carpet
Select paint
9-17
Critical Path
4
3
2
2
Start
1
3
3
1
A:
B:
C:
D:
7
1
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
6
1
5
1
Critical path
Longest path
through a network
Minimum project
completion time
9-18
Activity Start Times

Start at 5 months
4
3
2
2
Start
Finish at 9 months
7
1
1
3
3
1
Start at 3 months
5
1
Finish
6
1
Start at 6 months
9-19
Mode Configuration
Activity number
Earliest start
Earliest finish
Activity duration
Latest finish
Latest start
9-20
Forward Pass
Start at the beginning of CPM/PERT network to
determine the earliest activity times
Earliest Start Time (ES)
earliest time an activity can start

ES = maximum EF of immediate predecessors
Earliest finish time (EF)
earliest time an activity can finish

earliest start time plus activity time
EF= ES + t
9-21
Earliest Activity Start and

Finish Times
Lay foundations
Start
Build house
2
1
1
Design house
and obtain
financing
1
3
1
Order and receive
materials
Finish work
1
Select carpet
Select pain
9-22
Backward Pass
Determines latest activity times by starting at
the end of CPM/PERT network and working
forward
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
LS = minimum LS of immediate predecessors
9-23
Latest Activity Start and

Finish Times
Lay foundations
Start
Design house
and obtain
financing
Order and receive

materials
Build house
Finish work
Select carpet
Select pain
9-24
Activity Slack
Activity
LS
ES
LF
EF
Slack S
*1
00
00
33
33
*2
33
44
33
33
55
55
55
44
55
55
88
77
88
66
55
66
77
66
88
77
*7
88
88
99
99
3
*4
1
1
* Critical Path
9-25
Probabilistic Time Estimates

Beta distribution
a probability distribution traditionally used in

CPM/PERT
a + 4m + b
Mean (expected time):
t=
6
Variance:
where
b-a
2 = 6
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate
9-26
P(time)
P(time)
Examples of Beta Distributions
Time
P(time)
Time
m=t
Time
9-27
Project Network with Probabilistic

Time Estimates: Example
Equipment
installation
6,8,10
System
development
Start
3,6,9
Position
recruiting
1,3,5
Equipment testing
and modification
2,4,12
Manual
testing
2,3,4
System
training
3,7,11
Job Training
2,4,6
3,4,5
System
testing
Final
debugging
10
1,4,7
Finish
11
1,10,13
System
changeover
Orientation
2,2,2
9-28
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
9-29
Activity Early, Late Times,

and 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
9-30
Earliest, Latest, and Slack

1 0
8 1
Start
2 0
6 0
3 0
3 2
4 8
5 16 21
10 13 17
8 9
7 9
Critical Path
13
5 6
3 6
6 3
4 5
16
3
Finish
16
1 0
9 9 13
4 12 16
11 16 25
9 16 25
7 3 5
2 14 16
9-31
Total project variance

2 = 22 + 52 + 82 + 112
= 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks
9-32
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 x
is from mean
9-33
Normal Distribution Of Project

Time
Probability
= tp
Time
9-34
Southern Textile Example

What is the probability that the 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
9-35
Southern Textile Example

What is the probability that the project is completed
within 22 weeks?
Z = x-
2 = 6.89 weeks
P(x 22 weeks)
= 6.89
= 22 - 25
2.62
= 2.62 weeks
= -1.14
x = 22 = 25
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
9-36
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
9-37
Project Crashing: Example

4
2
8
12
7
4
12
3
4
5
4
6
4
9-38
Project Crashing: Example (cont.)

$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
9-39
Normal Activity and Crash Data
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
9-40
$500
$7000
2
8
12
$700
7
4
12
$400
3
4
Project Duration:
31 weeks
Additional Cost:
$2000
FROM
6
4
5
4
$3000
TO
Project Duration:
36 weeks
$200
$200
$500
$7000
2
8
12
$700
7
4
$400
3
4
$3000
5
4
$200
6
4
$200
9-41
Time-Cost Relationship
Crashing costs increase as project
duration decreases
Indirect costs increase as project
duration increases
Reduce project length as long as
crashing costs are less than indirect
costs
9-42
Time-Cost Tradeoff
Minimum cost = optimal project time
Total project cost
Cost ($)
Indirect cost
Direct cost
Crashing
Project duration
Time
9-43

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9-44

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Chapter 9

Copyright 2006 John Wiley & Sons, Inc.

unique, one-time operational activity or efort

constructing houses, factories, shopping malls, athletic

Copyright 2006 John Wiley & Sons, Inc.

Copyright 2006 John Wiley & Sons, Inc.