Production and Operations Management: Manufacturing and Services

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Chapter 3
Project Management
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OBJECTIVES

• Definition of Project Management
• Work Breakdown Structure
• Project Control Charts
• Structuring Projects
• Critical Path Scheduling

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Project Management

• Project is a series of related jobs usually
  directed toward some major output and requiring a
  significant period of time to perform
• Project Management are the management activities
  of planning, directing, and controlling resources
  (people, equipment, material) to meet the
  technical, cost, and time constraints of a project

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Advantages
Structuring Projects Pure Project
A pure project is where a self-contained team
works full-time on the project

• The project manager has full authority over the
  project
• Team members report to one boss
• Shortened communication lines
• Team pride, motivation, and commitment are high

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Disadvantages
Structuring Projects Pure Project

• Duplication of resources
• Organizational goals and policies are ignored
• Lack of technology transfer
• Team members have no functional area "home"

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Functional Project
A functional project is housed within a
functional division
Example, Project B is in the functional area of
Research and Development.
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Structuring Projects Functional Project
Advantages

• A team member can work on several projects
• Technical expertise is maintained within the
  functional area
• The functional area is a home after the project
  is completed
• Critical mass of specialized knowledge

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Structuring Projects Functional Project
Disadvantages

• Aspects of the project that are not directly
  related to the functional area get short-changed
• Motivation of team members is often weak
• Needs of the client are secondary and are
  responded to slowly

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Structuring Projects Matrix Project
Organization Structure
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Structuring Projects Matrix Project
Advantages

• Enhanced communications between functional areas
• Pinpointed responsibility
• Duplication of resources is minimized
• Functional home for team members
• Policies of the parent organization are followed

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Structuring Projects Matrix Project
Disadvantages

• Too many bosses
• Depends on project managers negotiating skills
• Potential for sub-optimization

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Statement of Work (SOW)

• A statement of work contains
• objectives to be achieved
• work to be done
• proposed schedule specifying the start and
  completion date
• performance measures in terms of budget and
  completion steps (milestones)
• written report to be supplied

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Work Breakdown Structure
A work breakdown structure defines the hierarchy
of project tasks, subtasks, and work packages
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Gantt Chart
Shows the amount of time involved and the
sequence in which activities can be performed
Vertical Axis Always Activities or
Jobs Activities Pieces of work that consume
time Do not necessarily require the expenditure
of effort by people
Horizontal Axis Always Time
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Network-Planning Models

• A project is made up of a sequence of activities
  that form a network representing a project
• The sequence of activities that form the longest
  chain in terms of their time to complete is the
  critical path in a project
• The critical path provides a wide range of
  scheduling information useful in managing a
  project
• Critical Path Method (CPM) helps to identify the
  critical path(s) in the project networks

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Prerequisites for Critical Path Methodology

• A project must have
• well-defined jobs or tasks whose completion marks
  the end of the project
• independent jobs or tasks
• and tasks that follow a given sequence.

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Types of Critical Path Methods

• CPM with a Single Time Estimate
• Used when activity times are known with certainty
• Used to determine timing estimates for the
  project, each activity in the project, and slack
  time for activities
• CPM with Three Activity Time Estimates
• Used when activity times are uncertain
• Used to obtain the same information as the Single
  Time Estimate model and probability information
• Time-Cost Models
• Used when cost trade-off information is a major
  consideration in planning
• Used to determine the least cost in reducing
  total project time

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Steps in the CPM with Single Time Estimate

• Activity Identification
• Activity Sequencing and Network Construction
• Determine the early start/finish and late
  start/finish schedule
• Determine the Critical Path
• The path with zero slack time

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Steps in the CPM with Single Time Estimate
1. Activity Identification 2. Activity Sequencing
and Network Construction
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Steps in the CPM with Single Time Estimate
3. Determine the early start/finish and late
start/finish schedule
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Steps in the CPM with Single Time Estimate
4. Determine the Critical Path the path with
zero slack time ABD
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Steps in the CPM with Single Time Estimate
1. Activity Identification 2. Activity Sequencing
and Network Construction
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Steps in the CPM with Single Time Estimate

• 3. Determine the early start/finish and late
  start/finish schedule
• 4. Determine the Critical Path the path with
  zero slack time

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Steps in the CPM with Single Time Estimate
Example Page 95, Solved Problem 1
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CPM with Single Time Estimate
More Example Consider the following consulting
project
Develop a critical path diagram and determine the
duration of the critical path and slack times for
all activities.
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First draw the network
Act. Imed. Pred. Time
A None 2
B A 1
C B 1
D C 2
E C 5
F D,E 5
G F 1
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Determine early starts and early finish times
ES4 EF6
D(2)
ES0 EF2
ES2 EF3
ES3 EF4
ES9 EF14
ES14 EF15
G(1)
A(2)
B(1)
C(1)
F(5)
ES4 EF9
Hint Start with ES0 and go forward in the
network from A to G.
E(5)
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Determine late starts and late finish times
Hint Start with LF15 or the total time of the
project and go backward in the network from G to
A.
ES4 EF6
ES0 EF2
ES2 EF3
ES3 EF4
LS7 LF9
C(1)
ES4 EF9
LS14 LF15
LS9 LF14
LS4 LF9
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Critical Path Slack
ES4 EF6
D(2)
ES0 EF2
ES2 EF3
ES3 EF4
LS7 LF9
C(1)
ES4 EF9
LS14 LF15
LS9 LF14
E(5)
LS4 LF9
Duration15 weeks
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Steps in the CPM with Three Activity Time
Estimates

• Activity Identification
• Activity Sequencing and Network Construction
• Calculate the expected time for each activity
• Determine the early start/finish and late
  start/finish schedule
• Determine the Critical Path
• Calculate the variances of the activity times
• Determine the probability of completing the
  project on a given date

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Steps in the CPM with Three Activity Time
Estimates
Example 3.2 Page 84
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Steps in the CPM with Three Activity Time
Estimates
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Steps in the CPM with Three Activity Time
Estimates
Example Page 95, Solved Problem 2
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CPM with Three Activity Time Estimates
More Example
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Expected Time Calculations
ET(A) 34(6)15 6
ET(A)42/67
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Expected Time Calculations
ET(B) 24(4)14 6
ET(B)32/65.333
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Expected Time Calculations
ET(C) 64(12)30 6
ET(C)84/614
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Network
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Probability Exercise
What is the probability of finishing this project
in less than 53 days?
p(t t
TE 54
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(Sum the variance along the critical path.)
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TE 54
D53
p(Z There is a 43.8 probability that this project
will be completed in less than 53 weeks.
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Additional Probability Exercise

• What is the probability that the project duration
  will exceed 56 weeks?

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Additional Exercise Solution
p(Z .312) .378, or 37.8 (1-NORMSDIST(.312))
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Time-Cost Models

• Basic Assumption Relationship between activity
  completion time and project cost
• Time Cost Models Determine the optimum point in
  time-cost tradeoffs
• Activity direct costs expediting activities
• Project indirect costs sustaining the project
• Activity completion times

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Steps in the Time-Cost Models

• Determine the cost per unit of time to expedite
  each activity number of days activity may be
  shortened given
• Normal cost (NC) the lowest expected activity
  cost
• Normal time (NT) the time associated with each
  normal cost
• Crash time (CT) the shortest possible activity
  time
• Crash cost (CC) the cost associated with each
  crash time
• Determine the critical path
• Shorten the critical path at the least cost

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Steps in the Time-Cost Models
Given CT, NT, NC, CC for each activity
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Steps in the Time-Cost Models
1. Determine the cost per unit of time to
expedite each activity number of days activity
may be shortened given
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Steps in the Time-Cost Models
2. Determine the critical path
Critical Path A B D
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Steps in the Time-Cost Models
3. Shorten the critical path at the least cost
(by one day at a time)
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Steps in the Time-Cost Models
Example Page 96, Solved Problem 3
Exercise Page 100, Problem 8
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CPM Assumptions/Limitations

• Project activities can be identified as entities
  (There is a clear beginning and ending point for
  each activity.)
• Project activity sequence relationships can be
  specified and networked
• Project control should focus on the critical path
• The activity times follow the beta distribution,
  with the variance of the project assumed to equal
  the sum of the variances along the critical path
• Project control should focus on the critical path

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Question Bowl

• Which of the following are examples of Graphic
  Project Charts?
• Gantt
• Bar
• Milestone
• All of the above
• None of the above

Answer d. All of the above
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Question Bowl

• Which of the following are one of the three
  organizational structures of projects?
• Pure
• Functional
• Matrix
• All of the above
• None of the above

Answer d. All of the above
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Question Bowl

• A project starts with a written description of
  the objectives to be achieved, with a brief
  statement of the work to be done and a proposed
  schedule all contained in which of the following?
  
• SOW
• WBS
• Early Start Schedule
• Late Start Schedule
• None of the above

Answer a. SOW (or Statement of Work)
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Question Bowl

• For some activities in a project there
  may be some leeway from when an activity can
  start and when it must finish. What is this
  period of time called when using the Critical
  Path Method?
• Early start time
• Late start time
• Slack time
• All of the above
• None of the above

Answer c. Slack time
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Question Bowl

• How much slack time is permitted in the
  critical path activity times?
• Only one unit of time per activity
• No slack time is permitted
• As much as the maximum activity time in the
  network
• As much as is necessary to add up to the total
  time of the project
• None of the above

Answer b. No slack time is permitted (All
critical path activities must have zero slack
time, otherwise they would not be critical to the
project completion time.)
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Question Bowl

• When looking at the Time-Cost Trade Offs in the
  Minimum-Cost Scheduling time-cost model, we seek
  to reduce the total time of a project by doing
  what to the least-cost activity choices?
• Crashing them
• Adding slack time
• Subtracting slack time
• Adding project time
• None of the above

Answer a. Crashing them (We crash the
least-cost activity times to seek a reduced total
time for the entire project and we do it
step-wise as inexpensively as possible.)
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End of Chapter 3