Project

Management

Dr. Ron Lembke

Operations Management
 What’s a Project?

• Changing something from the way

it is to the desired state
• Never done one exactly like this
• Many related activities
• Focus on the outcome
• Regular teamwork focuses on the
work process
 Examples of Projects

• Building construction
• New product introduction
• Software implementation
• Training seminar
• Research project
 Why are projects hard?
• Resources-
– People, materials
• Planning
– What needs to be done?
– How long will it take?
– What sequence?
– Keeping track of who is supposedly doing
what, and getting them to do it
IT Projects

• Half finish late and over budget

• Nearly a third are abandoned before
completion
– The Standish Group, in Infoworld

• Get & keep users involved & informed

• Watch for scope creep / feature creep
Pinion Pine Power
Plant SPP Co. 1992-97
• A year late, $25m over budget
• Experimental technology
– Coal gasification
– 20% less water than other plants
– Partnership with DOE
• Unfortunately, didn’t work
• “In the Reno demonstration project, researchers found an inherent
problem with the design of IGCC technology available at that time
such that it would not work above 300 feet from sea level
elevations.” - Wikipedia
• “Chemistry helped kill Pinon Pine, a $400 million government-
funded flop in Nevada.” – NJ Ledger
 Project Scheduling

• Establishing objectives
• Determining available resources
• Sequencing activities
• Identifying precedence relationships
• Determining activity times & costs
• Estimating material & worker
requirements
• Determining critical activities
Project Personnel
Structure
• Pure project “Skunk Works”
• Functional Project
• Matrix Project
Work Breakdown
Structure
• Hierarchy of what needs to be done, in
what order
• For me, the hardest part
– I’ve never done this before. How do I know
what I’ll do when and how long it’ll take?
– I think in phases
– The farther ahead in time, the less detailed
– Figure out the tricky issues, the rest is details
– A lot will happen between now and then
– It works not badly with no deadline
 Mudroom Remodel
D
• Big-picture sequence easy:
– Demolition W

– Framing
– Plumbing
– Electrical W D
– Drywall, tape & texture
– Slate flooring
– Cabinets, lights, paint
• Hard: can a sink fit?
Project Scheduling
Techniques

• Gantt chart
• Critical Path Method (CPM)
• Program Evaluation &
Review Technique (PERT)
 Gantt Chart

Time Period
Activity
J F M A M J J
Design
Build
Test
 PERT & CPM
• Network techniques
• Developed in 1950’s
• CPM by DuPont for chemical plants
• PERT by U.S. Navy for Polaris
missile
• Consider precedence relationships
& interdependencies
• Each uses a different estimate of
activity times
 Questions Answered by
PERT & CPM
• Completion date?
• On schedule? Within budget?
• Probability of completing by ...?
• Critical activities?
• Enough resources available?
• How can the project be finished early at
the least cost?
 PERT & CPM Steps

• Identify activities
• Determine sequence
• Create network
• Determine activity times
• Find critical path
• Earliest & latest start times
• Earliest & latest finish times
• Slack
 Activity on Node (AoN)

Project: Obtain a college degree (B.S.)

Attend class, Receive
Enroll
study etc. diploma

1 2 3
1 month 4? Years 1 day
 Activity on Arc (AoA)

Project: Obtain a college degree (B.S.)

Attend
class, Receive
study,
Enroll etc. diploma
1 2 3 4
1 month 4,5 ? 1 day
Years
 AoA Nodes have
meaning
Project: Obtain a college degree (B.S.)

1 2 3 4
Graduating
Applicant Student Alum
Senior
 We’ll use Activity on Node

1 2
1-2 must be done 4
before 2-3 or 3-4
can start
 Activity Relationships

2-3 must be done

before 3-4 or 3-5
can start 3

1 2 5

4
 Activity Relationships

2-4 and 3-4 must be

done before 4-5 can
start 3

1 2 5

4
 Network Example

You’re a project manager for Bechtel.

Construct the network.
Activity Predecessors
A --
B A
C A
D B
E B
F C
G D
H E, F
 Network Example -
AON

D
B G

A E Z

C H
F
 Network Example -
AOA

D G
3 6 8
B E
A
1 2 5 H
7 9
C F
4
 AOA Diagrams
A precedes B and C, B and C precede D

A B
1 2 3 D
4
C

3
B
A C
1 2 4 D 5
Add a phantom arc for clarity.
 Critical Path Analysis
• Provides activity information
• Earliest (ES) & latest (LS) start
• Earliest (EF) & latest (LF) finish
• Slack (S): Allowable delay
• Identifies critical path
• Longest path in network
• Shortest time project can be
completed
• Any delay on activities delays project
• Activities have 0 slack
 Critical Path
Analysis Example
Event Description Time
Pred.
ID (Wks)
A None Prepare Site 1
B A Pour fdn. & frame 6
C B Buy shrubs etc. 3
D B Roof 2
E D Do interior work 3
F C Landscape 4
G E,F Move In 1
 Network Solution

B D E

A 6 2 3 G

1 1
C F
3 4
 Earliest Start & Finish
Steps
• Begin at starting event & work forward
• ES = 0 for starting activities
• ES is earliest start
• EF = ES + Activity time
• EF is earliest finish
• ES = Maximum EF of all predecessors for
non-starting activities
 Activity A
Earliest Start Solution

Activity ES EF LS LF Slack
A 0 1
B B D E
C
D
A 6 2 3 G
E 1 1
C F
F
3 4
For starting activities, ES = 0.
 Earliest Start Solution

Activity ES EF LS LF Slack
A 0 1
B 1 7 B D E
C 1 4
D 7 9 A 6 2 3 G
E 9 12
1 C F 1
F 4 8
G 12 13
3 4
 Latest Start & Finish
Steps
• Begin at ending event & work backward
• LF = Maximum EF for ending activities
• LF is latest finish; EF is earliest finish
• LS = LF - Activity time
• LS is latest start
• LF = Minimum LS of all successors for
non-ending activities
 Earliest Start Solution

Activity ES EF LS LF Slack
A 0 1
B 1 7
B D E
C 1 4 A 6 2 3 G
D 7 9 1 C F 1
E 9 12
F 4 8 3 4
G 12 13 13
 Latest Finish Solution

Activity ES EF LS LF Slack
A B0 D E1 0 1
B A 61 2 73 G 1 7
C 1 1 4 1
4 7
C F
D 7 9 7 9
3 4
E 9 12 9 12
F 4 8 7 12
G 12 13 12 13
 Compute Slack

Activity ES EF LS LF Slack
A 0 1 0 1 0
B 1 7 1 7 0
C 1 4 5 8 4
D 7 9 7 9 0
E 9 12 9 12 0
F 4 8 8 12 4
G 12 13 12 13 0
 Critical Path

B D E
A 6 2 3 G
1 1
C F
3 4
New notation

ES EF

C7
LS LF

• Compute ES, EF for each

activity, Left to Right
• Compute, LF, LS, Right to Left
 Exhibit 2.6, p.35

C7 F8

A 21 G2

B5 D2 E5
 Exhibit 2.6, p.35

21 28 28 36
C7 F8
0 21 36 38
A 21 G2
21 26 26 28 28 33
B5 D2 E5
F cannot start until C and D are done.
G cannot start until both E and F are done.
 Exhibit 2.6, p.35

21 28 28 36
C7 F8
21 28 28 36
0 21 36 38
A 21 G2
0 21 36 38
21 26 26 28 28 33
B5 D2 E5
21 26 26 28 31 36
E just has to be done in time for G to start at 36, so it has slack.
D has to be done in time for F to go at 28, so it has no slack.
 Exhibit 2.6, p.35

21 28 28 36
C7 F8
21 28 28 36
0 21 36 38
A 21 G2
0 21 36 38
21 26 26 28 28 33
B5 D2 E5
21 26 26 28 31 36
 Gantt Chart - ES
A

0 5 10 15 20 25 30 35 40
Can We Go Faster?
 Time-Cost Models

1. Identify the critical path

2. Find cost per day to expedite each node on
critical path.
3. For cheapest node to expedite, reduce it as
much as possible, or until critical path
changes.
4. Repeat 1-3 until no feasible savings exist.
Time-Cost Example D8

A 10 B 10 C 10
• ABC is critical path=30

Crash cost Crash

per week wks avail Cheapest way to gain 1
A 500 2 Week is to cut A

B 800 3
C 5,000 2
D 1,100 2
Time-Cost Example D8

A9 B 10 C 10
• ABC is critical path=29
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail
A 500 1
B 800 3 Cheapest way to gain 1 wk
C 5,000 2 Still is to cut A

D 1,100 2
Time-Cost Example D8

A8 B 10 C 10
• ABC is critical path=28
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail 2 500 1,000
A 500 0
B 800 3 Cheapest way to gain 1 wk
C 5,000 2 is to cut B

D 1,100 2
Time-Cost Example D8

A8 B9 C 10
• ABC is critical path=27
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail 2 500 1,000
3 800 1,800
A 500 0
B 800 2 Cheapest way to gain 1 wk
C 5,000 2 Still is to cut B

D 1,100 2
Time-Cost Example D8

A8 B8 C 10
• Critical paths=26 ADC & ABC
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail 2 500 1,000
3 800 1,800
A 500 0 4 800 2,600
B 800 1 To gain 1 wk, cut B and D,
C 5,000 2 Or cut C
Cut B&D = $1,900
D 1,100 2 Cut C = $5,000
So cut B&D
Time-Cost Example D7

A8 B7 C 10
• Critical paths=25 ADC & ABC
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail 2 500 1,000
3 800 1,800
A 500 0 4 800 2,600
B 800 0 5 1,900 4,500

C 5,000 2 Can’t cut B any more.

Only way is to cut C
D 1,100 1
Time-Cost Example D7

A8 B7 C9
• Critical paths=24 ADC & ABC
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail 2 500 1,000
3 800 1,800
A 500 0 4 800 2,600
B 800 0 5 1,900 4,500
6 5,000 9,500
C 5,000 1
D 1,100 1 Only way is to cut C
Time-Cost Example D7

A8 B7 C8
• Critical paths=23 ADC & ABC
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail 2 500 1,000
3 800 1,800
A 500 0 4 800 2,600
B 800 0 5 1,900 4,500
6 5,000 9,500
C 5,000 0 7 5,000 14,500
D 1,100 1 No remaining possibilities to
reduce project length
Time-Cost Example D7

• Now we know how much it A8 B7 C8

costs us to save any
number of days Wks Incremental Total
• Customer says he will pay Gained Crash $ Crash $
$2,000 per day saved. 1 500 500
2 500 1,000
• Only reduce 5 days. 3 800 1,800
• We get $10,000 from 4 800 2,600
5 1,900 4,500
customer, but pay $4,500 in 6 5,000 9,500
expediting costs 7 5,000 14,500
• Increased profits = $5,500 No remaining possibilities to
reduce project length
What about
Uncertainty?
 PERT Activity Times

• 3 time estimates
• Optimistic times (a) 

• Most-likely time (m)
• Pessimistic time (b)
• Follow beta distribution
• Expected time: t = (a + 4m + b)/6
• Variance of times: v = (b - a)2/36
 Project Times

• Expected project a  4m  b
time (T) ET 
6
• Sum of critical path
activity times, t
• Project variance (V)  2

b  a
2

36
• Sum of critical path
activity variances, v
 Example A B C
4.33 6.48 7.67

Activity a m b E[T] variance

A 2 4 8 4.33 1
B 3 6.1 11.5 6.48 2
C 4 8 10 7.67 1

Project 18.5 4
 Sum of 3 Normal
Random Numbers
X  10
Average value of the sum is
  10
2
equal to the sum of the averages

Variance of the sum is equal to

X  20 the sum of the variances

 2  15 Notice curve of sum is more spread

out because it has large variance

X  30
 2  35
10 20 30 40 50 60
X  60
 2  60
Back to the Example:
Probability of <= 21 wks
Average time = 18.5, st. dev = 2

21 is how many standard deviations

above the mean?

21-18.5 = 2.5.
St. Dev = 2,
so 21 is 2.5/2 = 1.25 standard
deviations above the mean

Book Table says area between mean and

1.25 st dv is 0.3944

Probability <= 17 = 0.5+0.3944

18.5 21 = 0.8944 = 89.44%
 Benefits
of PERT/CPM
• Useful at many stages of project
management
• Mathematically simple
• Use graphical displays
• Give critical path & slack time
• Provide project documentation
• Useful in monitoring costs
 Limitations
of PERT/CPM
• Clearly defined, independent, &
stable activities
• Specified precedence
relationships
• Activity times (PERT) follow
beta distribution
• Subjective time estimates
• Over emphasis on critical path
 Conclusion

• Explained what a project is

• Summarized the 3 main project
management activities
• Drew project networks
• Compared PERT & CPM
• Determined slack & critical path
• Computed project probabilities