Project Management

Dr. Ron Lembke Operations Management

Whats 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, didnt 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 governmentfunded 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
Ive never done this before. How do I know what Ill do when and how long itll 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
Big-picture sequence easy:
Demolition Framing Plumbing Electrical Drywall, tape & texture Slate flooring Cabinets, lights, paint
D W

Hard: can a sink fit?

Project Scheduling Techniques

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

Gantt Chart
Time Period F M A M J

Activity Design Build Test

PERT & CPM

Network techniques Developed in 1950s
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.)
Enroll Attend class, study etc. Receive diploma

1
1 month

2
4? Years

3
1 day

Activity on Arc (AoA)

Project: Obtain a college degree (B.S.)
Attend class, study, etc. Receive diploma

Enroll

2
1 month 4,5 ? Years

3
1 day

AoA Nodes have meaning

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

1
Applicant

2
Student

3
Graduating Senior

4
Alum

Well use Activity on Node

3 1

2 4

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

Activity Relationships
2-3 must be done before 3-4 or 3-5 can start

2 4

Activity Relationships
2-4 and 3-4 must be done before 4-5 can start

2 4

Network Example
Youre a project manager for Bechtel. Construct the network.
Activity A B C D E F G H Predecessors -A A B B C D E, F

Network Example AON

D B

Network Example AOA

3 D E 6 H

B 1 A 2 C

5
F

AOA Diagrams
A precedes B and C, B and C precede D

B
2 C 3 3 D 4

B 1 A 2

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 ID Pred. None Description Prepare Site Pour fdn. & frame Buy shrubs etc. Roof Do interior work Landscape Move In Time (Wks)

A B C D E F G

A B B D C E,F

1 6 3 2 3 4 1

Network Solution B A
1

D
2

E
3

G
1

C
3

F
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 A B C D E F ES 0 EF 1 LS LF Slack

B A
1
6

D
2

E
3

G
1

C
3

F
4

For starting activities, ES = 0.

Earliest Start Solution

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

B A
1
6

D
2

E
3

G
1

C
3

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

B
A
6 1 C 3

D E
2 3 G F 1 4
13

Latest Finish Solution

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

G 1

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

Critical Path

B A 1 6

D 2

E 3 G

C
3

F
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 A 21 B5 D2 E5 F8 G2

Exhibit 2.6, p.35

21 28 28 36

C7
0 21

F8
36 38

A 21
21 26 26 28 28 33

G2 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
21 21 21 21 21 26 26 26 26 28 28 28 31 33 36

28
28

28
28

36
36 36 36 38 38

C7
0 0

F8 G2

A 21 B5 D2 E5

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
21 21 21 21 21 26 26 26 26 28 28 28 31 33 36

28
28

28
28

36
36 36 36 38 38

C7
0 0

F8 G2

A 21 B5 D2 E5

Gantt Chart - ES
A C B D E F G 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
ABC is critical path=30
A 10

D8

B 10

C 10

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 2 3 2 2

Cheapest way to gain 1 Week is to cut A

Time-Cost Example
ABC is critical path=29
A9

D8

B 10

C 10

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 1 3 2 2

Wks Incremental Total Gained Crash $ Crash $ 1 500 500

Cheapest way to gain 1 wk Still is to cut A

Time-Cost Example
ABC is critical path=28
A8

D8

B 10

C 10

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 0 3 2 2

Wks Incremental Total Gained Crash $ Crash $ 1 500 500 2 500 1,000

Cheapest way to gain 1 wk is to cut B

Time-Cost Example
ABC is critical path=27
A8

D8

B9

C 10

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 0 2 2 2

Wks Incremental Total Gained Crash $ Crash $ 1 500 500 2 500 1,000 3 800 1,800 Cheapest way to gain 1 wk Still is to cut B

Time-Cost Example
Critical paths=26 ADC & ABC
A8

D8

B8

C 10

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 0 1 2 2

Wks Incremental Total Gained Crash $ Crash $ 1 500 500 2 500 1,000 3 800 1,800 4 800 2,600 To gain 1 wk, cut B and D, Or cut C Cut B&D = $1,900 Cut C = $5,000 So cut B&D

Time-Cost Example
Critical paths=25 ADC & ABC
A8

D7

B7

C 10

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 0 0 2 1

Wks Incremental Total Gained Crash $ Crash $ 1 500 500 2 500 1,000 3 800 1,800 4 800 2,600 5 1,900 4,500 Cant cut B any more. Only way is to cut C

Time-Cost Example
Critical paths=24 ADC & ABC
A8

D7

B7

C9

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 0 0 1 1

Wks Incremental Total Gained Crash $ Crash $ 1 500 500 2 500 1,000 3 800 1,800 4 800 2,600 5 1,900 4,500 6 5,000 9,500 Only way is to cut C

Time-Cost Example
Critical paths=23 ADC & ABC
A8

D7

B7

C8

Crash cost per week A 500 B 800 C 5,000 D 1,100

Crash wks avail 0 0 0 1

Wks Incremental Total Gained Crash $ Crash $ 1 500 500 2 500 1,000 3 800 1,800 4 800 2,600 5 1,900 4,500 6 5,000 9,500 7 5,000 14,500 No remaining possibilities to reduce project length

Time-Cost Example
Now we know how much it costs us to save any number of days Customer says he will pay $2,000 per day saved. Only reduce 5 days. We get $10,000 from customer, but pay $4,500 in expediting costs Increased profits = $5,500
A8

D7

B7

C8

Wks Incremental Total Gained Crash $ Crash $ 1 500 500 2 500 1,000 3 800 1,800 4 800 2,600 5 1,900 4,500 6 5,000 9,500 7 5,000 14,500 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 time (T)
Sum of critical path activity times, t

a 4m b ET 6

Project variance (V)

Sum of critical path activity variances, v

b a
36

Example
Activity A B C Project a m b 2 4 8 3 6.1 11.5 4 8 10

A
4.33

B
6.48

C
7.67

E[T] variance 4.33 1 6.48 2 7.67 1 18.5 4

Sum of 3 Normal Random Numbers

X 10

10
2

Average value of the sum is equal to the sum of the averages Variance of the sum is equal to the sum of the variances Notice curve of sum is more spread out because it has large variance

X 20

2 15
X 30

2 35

X 60

10

20

30

40

50

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 18.5 21 Probability <= 17 = 0.5+0.3944 = 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