17
Project
Management
McGraw-Hill/Irwin
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives




Discuss the behavioral aspects of projects
in terms of project personnel and the
project manager.
Discuss the nature and importance of a
work breakdown structure in project
management.
Give a general description of PERT/CPM
techniques.
Construct simple network diagrams.
17-2
Learning Objectives




List the kinds of information that a PERT or
CPM analysis can provide.
Analyze networks with deterministic times.
Analyze networks with probabilistic times.
Describe activity “crashing” and solve
typical problems.
17-3
Projects
JAN
FEB
MAR
APR
MAY
JUN
Build A
A Done
Build B
B Done
Build C
C Done
Build D
On time!
Ship
Unique, one-time operations designed to
accomplish a specific set of objectives in a
limited time frame.
17-4
Project Management
 How is it different?
 Limited time frame
 Narrow focus, specific objectives
 Less bureaucratic
 Why is it used?
 Special needs
 Pressures for new or improves products or
services
17-5
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
17-6
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
17-7
Project Management
 What are the tools?




Work breakdown structure
Network diagram
Gantt charts
Risk management
17-8
Planning and Scheduling
Gantt Chart
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Locate new
facilities
Interview staff
Hire and train staff
Select and order
furniture
Remodel and install
phones
Move in/startup
17-9
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
17-10
Project Manager
Responsible for:
Work
Human Resources
Communications
Quality
Time
Costs
17-11
Ethical Issues
 Temptation to understate costs
 Withhold information
 Misleading status reports
 Falsifying records
 Comprising workers’ safety
 Approving substandard work
17-12
Project Life Cycle
Concept
Planning
Execution
Management
Feasibility
Termination
17-13
Work Breakdown Structure
Figure 17.2
Project X
Level 1
Level 2
Level 3
Level 4
17-14
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
17-15
The Network Diagram
 Network (precedence) diagram – diagram of
project activities that shows sequential
relationships by the use of arrows and nodes.
 Activity-on-arrow (AOA) – a network diagram
convention in which arrows designate activities.
 Activity-on-node (AON) – a network diagram
convention in which nodes designate activities.
 Activities – steps in the project that consume
resources and/or time.
 Events – the starting and finishing of activities,
designated by nodes in the AOA convention. 17-16
The Network Diagram (cont’d)
 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
17-17
Project Network – Activity on
Arrow
Figure 17.4
AOA
Locate
facilities
Order
furniture
4
Furniture
setup
2
Remodel
1
5
6
Move
in
Interview
3
Hire and
train
17-18
Project Network – Activity on
Node
Figure 17.4
Order
furniture
AON
Locate
facilities
Furniture
setup
2
6
1
Move
in
Remodel
5
S
Interview
3
7
Hire and
train
4
17-19
Network Conventions
a
c
a
c
b
a
a
c
c
b
b
b
d
Dummy
activity
17-20
Time Estimates
 Deterministic
 Time estimates that are fairly certain
 Probabilistic
 Estimates of times that allow for variation
17-21
Example 1
Figure 17.5
Deterministic
time estimates
8 weeks
6 weeks
4
3 weeks
2
11 weeks
1
5
Move
in
6
1 week
4 weeks
9 weeks
3
17-22
Example 1 Solution
Critical Path
Path
Length
Slack
(weeks)
1-2-3-4-5-6
1-2-5-6
1-3-5-6
18
20
14
2
0
6
17-23
Computing Algorithm
 Network activities




ES: early start
EF: early finish
LS: late start
LF: late finish
 Used to determine
 Expected project duration
 Slack time
 Critical path
17-24
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
17-25
Probabilistic Estimates
Figure 17.8
Beta Distribution
to
Activity
start
Optimistic
time
tm
te
Most likely
time (mode)
tp
Pessimistic
time
17-26
Expected Time
te
t
+
4t
+t
o
m
p
=
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time
17-27
Variance
2
2
(t
–
t
)
= p o
36
2 = variance
to = optimistic time
tp = pessimistic time
17-28
Example 5
Optimistic
time
Most likely
time
Pessimistic
time
2-4-6
b
3-4-5
d
3-5-7
e
5-7-9
f
4-6-8
h
17-29
Example 5 Time Estimates
Tabc = 10.0
Tdef = 16.0
Tghi = 13.50
4.00
b
4.00
d
5.0
e
7.0
f
6.0
h
17-30
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.
17-31
Example 6
17
Weeks
1.00
a-b-c
Weeks
10.0
d-e-f
16.0
Weeks
1.00
g-h-i
13.5
Weeks
17-32
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
17-33
Time-Cost Trade-Offs: Crashing
Figure 17.11
Total
cost
Expected indirect costs
Shorten
CRASH
Cumulative
cost of
crashing
Shorten
Optimum
17-34
Example 7
2
f
4
d
17-35
Advantages of PERT
 Forces managers to organize
 Provides graphic display of activities
 Identifies
4

Critical activities

Slack activities
2
1
5
6
3
17-36
Limitations of PERT
 Important activities may be omitted
 Precedence relationships may not be
correct
 Estimates may include
a fudge factor
 May focus solely
on critical path
4
2
1
5
6
142 weeks
3
17-37
Goldratt’s Critical Chain
 Goldratt’s insight on project management
 Time estimates are often pessimistic
 Activities finished ahead of schedule often go
unreported
 With multiple projects, resources needed for one
project may be in use on another
17-38
Project Management Software
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Computer aided design (CAD)
Groupware (Lotus Notes)
CA Super Project
Harvard Total Manager
MS Project
Sure Track Project Manager
Time Line
17-39
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
17-40
Project Risk Management
 Risk: occurrence of events that have
undesirable consequences
 Delays
 Increased costs
 Inability to meet specifications
 Project termination
17-41
Risk Management
 Identify potential risks
 Analyze and assess risks
 Work to minimize occurrence of risk
 Establish contingency plans
17-42
Summary
 Projects are a unique set of activities
 Projects go through life cycles
 PERT and CPM are two common
techniques
 Network diagrams
 Project management software available
17-43