Chapter 9
Project Management
Russell and Taylor
Operations and Supply Chain Management,
8th Edition
Lecture Outline
•
•
•
•
•
•
•
Project Planning – Slide 5
Project Scheduling – Slide 18
Project Control – Slide 21
CPM/PERT – Slide 22
Probabilistic Activity Times – Slide 34
Microsoft Project – Slide 46
Project Crashing and Time-Cost Trade-off – Slide 56
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Learning Objectives
• Discuss the project planning process, including planning
tools, evaluation methods, and key concepts
• Discuss the benefits of and strategies for dealing with
diverse project groups
• Explain the basics of project scheduling and the use of
Gantt charts
• Define enterprise project management and discuss the
key elements in project control
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Learning Objectives
• Define enterprise project management and discuss the
key elements in project control
• Develop and analyze both deterministic AND probabilistic
project networks
• Use Microsoft Project for network analysis
• Determine and explain project crashing and time-cost
tradeoffs
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Project Planning
• A Project …
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•
•
•
•
•
Has a unique purpose
IS not repetitive
Is accomplished in a finite time by TEAMS
Is a one-time operational activity or effort
Has definite starting and stopping points
Produces a unique product customized to meet
customer requirements
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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The Project Management Process and
Components
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Project Management Components
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Project Management Process
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Elements of a Project Plan
•
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•
•
•
•
•
Objective or Purpose
Scope
Contract requirements
Schedules—time, cost (budget)
Resources—cost, time
Personnel
Control
Risk and problem analysis
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Project Return
•
•
•
•
Project requires positive gain or benefit
ROI is one measure, but not always applicable
“Soft” returns
Projects for public good
(Gain from project – cost of project)
ROI =
Cost of project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Requirements Document
• A detailed description of customer requirements
that will be accommodated by this project
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Work Breakdown Structure
• Organizes the work in a project
• Breaks project into components,
subcomponents, work packages
• Start at the top and work down
• Brainstorm project scope
• A graphic delineation of SCOPE
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Work Breakdown Structure for Computer Order
Processing System Project
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Responsibility Assignment Matrix
• Organizational Breakdown Structure (OBS)
• a chart that shows which organizational units are
responsible for which work items
• Responsibility Assignment Matrix (RAM)
• shows who is responsible for the work in a project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Responsibility Assignment Matrix
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Global Cultural 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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Project Scheduling
• Steps
–
–
–
–
Define activities
Sequence activities
Estimate time
Develop schedule
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
• Techniques
– Gantt chart
– CPM/PERT
• Software
– Microsoft Project
9-19
Gantt Chart—the most important Graphics
Tool
• Graph or bar chart
• TIME is the independent variable exhibited on the
S-axis
• Horizontal bars represent the time for each task
• Bars also indicate status of tasks
• Provides visual display of project schedule
• Shows precedence – sequence of tasks
• Shows slack
– amount of time an activity can be delayed without
delaying the project
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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A Gantt Chart
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Project Control
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Time management
Cost management
Quality management
Performance management
Communication
Enterprise project management
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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CPM/PERT—methods for project scheduling
• Critical Path Method (CPM)
• DuPont & Remington-Rand (1955)
• Deterministic task times
• Activity-on-node network construction
• Project Evaluation and Review Technique (PERT)
• US Navy and Booz, Allen & Hamilton (1952)
• Probabilistic task time estimates
• Activity-on-arrow network construction
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Project Network
• Activity-on-node (AON)
– nodes represent activities
– arrows show precedence
relationships
• Activity-on-arrow (AOA)
– arrows represent activities
– nodes are events for
points in time
• Event
– completion or beginning
of an activity in a project
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AOA Project Network for a House
You will never see this type of network again!!
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AON Network for House Building
Project
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Activity Start Times
A:
B:
C:
D:
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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
Critical path
• Longest path through a
network
• Minimum project completion
time
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Activity Scheduling
• Forward pass
• starts at beginning of CPM/PERT network to
determine 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
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Node Configuration
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Earliest Activity Start and Finish Times
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Activity Scheduling
• 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
• LF = minimum LS of immediate predecessors
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Latest Activity Start and Finish Times
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Activity Slack
Activity
LS
ES
LF
EF
Slack S
*1
0
0
3
3
0
*2
3
3
5
5
0
3
4
3
5
4
1
*4
5
5
8
8
0
5
6
5
7
6
1
6
7
6
8
7
1
*7
8
8
9
9
0
* Critical Path
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Probabilistic Activity Times
• Beta distribution
• probability distribution traditionally used in CPM/PERT
Mean (expected time):
Variance:
a + 4m + b
t=
6
b-a
 = 6
2
2
where
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Examples of the Beta Distribution
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Project with Probabilistic Time
Estimates
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Activity Time Estimates
TIME ESTIMATES (WKS)
ACTIVITY
1
2
3
4
5
6
7
8
9
10
11
MEAN TIME
VARIANCE
a
m
b
t
б2
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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Activity Early, Late Times & Slack
ACTIVITY
1
2
3
4
5
6
7
8
9
10
11
t
б
ES
EF
LS
LF
S
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
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Earliest, Latest Times, and Slack
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Total Project Variance
2 = б22 + б52 + б82 + б112
 = 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks
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CPM/PERT With OM Tools
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Probabilistic Network Analysis
Determine probability that project is
completed within specified time
Z=
where
=
=
x=
Z=
x-

tp = project mean time
project standard deviation
proposed project time
number of standard deviations that
x is from the mean
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Normal Distribution of Project Time
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Southern Textile – 30 weeks
 2 = 6.89 weeks
 =
6.89
 = 2.62 weeks
Z=
=
x-

30 - 25
2.62
= 1.91
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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Southern Textile – 22 weeks
 2 = 6.89 weeks
 =
6.89
 = 2.62 weeks
Z=
=
x-

22 - 25
2.62
= -1.14
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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
9-46
Microsoft Project
• Popular software package for project
management and CPM/PERT analysis
• Relatively easy to use
• House-building example
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Microsoft Project
Click on “Tasks”
First step;
Start Date
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Microsoft Project
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Microsoft Project
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Microsoft Project – Zoom View
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PERT Analysis with Microsoft Project
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PERT Analysis with Microsoft Project
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PERT Analysis with Microsoft Project
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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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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Normal Time and Cost
vs. Crash Time and Cost
$7,000 –
$6,000 –
Crash cost
$5,000 –
Crashed activity
Slope = crash cost per week
$4,000 –
$3,000 –
$2,000 –
Normal activity
Normal cost
$1,000 –
Normal time
Crash time
–
0
|
2
|
4
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
|
6
|
8
|
10
|
12
|
14
Weeks
9-56
Project Network – Building a House
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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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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
9-58
Weekly Crash Costs – Fig 9-16a
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Project Crashed to 31 Weeks
Fig 9-16b
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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 and you will be saving
money as well as reducing project duration
• You can crash the even further but it will cost
more
• Crashing should be done before execution in the
planning phase
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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