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Management
Chapter 3
Project Management
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
2008 Prentice Hall, Inc.
31
Outline
Global Company Profile: Bechtel
Group
The Importance of Project
Management
Project Planning
The Project Manager
Work Breakdown Structure
Project Scheduling
2008 Prentice Hall, Inc.
32
Outline - Continued
Project Controlling
Project Management Techniques:
PERT and CPM
The Framework of PERT and CPM
Network Diagrams and Approaches
Activity-on-Node Example
Activity-on-Arrow Example
2008 Prentice Hall, Inc.
33
Outline - Continued
Determining the Project Schedule
Forward Pass
Backward Pass
Calculating Slack Time and Identifying
the Critical Path(s)
34
Outline - Continued
Cost-Time Trade-Offs and Project
Crashing
A Critique of PERT and CPM
Using Microsoft Project to Manage
Projects
Creating a Project Schedule Using MS
Project
Tracking Progress and Managing
Costs Using MS Project
2008 Prentice Hall, Inc.
35
Learning Objectives
When you complete this chapter you
should be able to:
1. Create a work breakdown
structure
2. Draw AOA and AON networks
3. Complete both forward and
backward passes for a project
4. Determine a critical path
2008 Prentice Hall, Inc.
36
Learning Objectives
When you complete this chapter you
should be able to:
5. Calculate the variance of activity
times
6. Crash a project
7. Use Microsoft Project software
to create a project
37
Bechtel Projects
Building 26 massive distribution centers in just
two years for the internet company Webvan Group
($1 billion)
Constructing 30 high-security data centers
worldwide for Equinix, Inc. ($1.2 billion)
Building and running a rail line between London
and the Channel Tunnel ($4.6 billion)
Developing an oil pipeline from the Caspian Sea
region to Russia ($850 million)
Expanding the Dubai Airport in the UAE ($600
million), and the Miami Airport in Florida ($2
billion)
2008 Prentice Hall, Inc.
38
Bechtel Projects
Building liquid natural gas plants in Yemen $2
billion) and in Trinidad, West Indies ($1 billion)
Building a new subway for Athens, Greece ($2.6
billion)
Constructing a natural gas pipeline in Thailand
($700 million)
Building 30 plants for iMotors.com, a company
that sells refurbished autos online ($300 million)
Building a highway to link the north and south of
Croatia ($303 million)
39
Strategic Importance of
Project Management
Microsoft Windows Vista Project:
hundreds of programmers
millions of lines of code
hundreds of millions of dollars cost
3 10
Project Characteristics
Single unit
Many related activities
Difficult production planning and
inventory control
General purpose equipment
High labor skills
3 11
Examples of Projects
Building Construction
Research Project
2008 Prentice Hall, Inc.
3 12
Management of Projects
1. Planning - goal setting, defining the
project, team organization
2. Scheduling - relates people, money,
and supplies to specific activities
and activities to each other
3. Controlling - monitors resources,
costs, quality, and budgets; revises
plans and shifts resources to meet
time and cost demands
2008 Prentice Hall, Inc.
3 13
Project Management
Activities
Planning
Objectives
Scheduling
Resources
Work break-down
schedule
Organization
Project activities
Start & end times
Network
Controlling
Monitor, compare, revise, action
2008 Prentice Hall, Inc.
3 14
Project Planning,
Scheduling, and Controlling
Figure 3.1
Before
project
2008 Prentice Hall, Inc.
Start of project
Timeline
During
project
3 15
Project Planning,
Scheduling, and Controlling
Figure 3.1
Before
project
2008 Prentice Hall, Inc.
Start of project
Timeline
During
project
3 16
Project Planning,
Scheduling, and Controlling
Figure 3.1
Before
project
2008 Prentice Hall, Inc.
Start of project
Timeline
During
project
3 17
Project Planning,
Scheduling, and Controlling
Figure 3.1
Before
project
2008 Prentice Hall, Inc.
Start of project
Timeline
During
project
3 18
estimates
Project Time/cost
Planning,
Budgets
Engineering diagrams
Scheduling, and
Controlling
Cash flow charts
Material availability details
Budgets
Delayed activities report
Slack activities report
CPM/PERT
Gantt charts
Milestone charts
Cash flow schedules
Figure 3.1
Before
project
2008 Prentice Hall, Inc.
Start of project
Timeline
During
project
3 19
Project Planning
Establishing objectives
Defining project
Creating work
breakdown structure
Determining
resources
Forming organization
3 20
Project Organization
Often temporary structure
Uses specialists from entire company
Headed by project manager
Coordinates activities
Monitors schedule
and costs
Permanent
structure called
matrix organization
2008 Prentice Hall, Inc.
3 21
A Sample Project
Organization
President
Human
Resources
Marketing
Project 1
Project 2
Figure 3.2
2008 Prentice Hall, Inc.
Finance
Design
Quality
Mgt
Production
Mechanical
Engineer
Test
Engineer
Technician
Electrical
Engineer
Computer
Engineer
Technician
Project
Manager
Project
Manager
3 22
Project Organization
Works Best When
1. Work can be defined with a specific
goal and deadline
2. The job is unique or somewhat
unfamiliar to the existing organization
3. The work contains complex
interrelated tasks requiring specialized
skills
4. The project is temporary but critical to
the organization
5. The project cuts across organizational
lines
2008 Prentice Hall, Inc.
3 23
Matrix Organization
Marketing
Operations
Engineering
Finance
Project 1
Project 2
Project 3
Project 4
3 24
The Role of
the Project Manager
Highly visible
Responsible for making sure that:
All necessary activities are finished in order
and on time
The project comes in within budget
The project meets quality goals
The people assigned to the project receive
motivation, direction, and information
2008 Prentice Hall, Inc.
3 25
The Role of
the Project Manager
Highly visible
Project
managers
Responsible for making
sure
that: should be:
Good coaches
All necessary activities are finished in order
Good communicators
and on time
in
Able
to organize
The project comes
within
budget activities
from a variety of disciplines
The project meets quality goals
The people assigned to the project receive
motivation, direction, and information
2008 Prentice Hall, Inc.
3 26
Ethical Issues
Bid rigging divulging confidential information
to give some bidders an unfair advantage
Low balling contractors try to buy the
project by bidding low and hope to renegotiate
or cut corners
Bribery particularly on international projects
Expense account padding
Use of substandard materials
Compromising health and safety standards
Withholding needed information
Failure to admit project failure at close
2008 Prentice Hall, Inc.
3 27
3 28
Activity
1.0
1.1
Develop of GUIs
1.2
1.21
1.22
1.23
1.231
Level
Figure 3.3
2008 Prentice Hall, Inc.
3 29
Project Scheduling
Identifying precedence
relationships
Sequencing activities
Determining activity
times & costs
Estimating material &
worker requirements
Determining critical
activities
2008 Prentice Hall, Inc.
3 30
Purposes of Project
Scheduling
1. Shows the relationship of each activity to
others and to the whole project
2. Identifies the precedence relationships
among activities
3. Encourages the setting of realistic time
and cost estimates for each activity
4. Helps make better use of people, money,
and material resources by identifying
critical bottlenecks in the project
2008 Prentice Hall, Inc.
3 31
Scheduling Techniques
1. Ensure that all activities are
planned for
2. Their order of performance is
accounted for
3. The activity time estimates are
recorded
4. The overall project time is
developed
2008 Prentice Hall, Inc.
3 32
Project Management
Techniques
Gantt chart
Critical Path Method
(CPM)
Program Evaluation
and Review
Technique (PERT)
3 33
Time
A M J
Design
Prototype
Test
Revise
Production
3 34
Figure 3.4
2008 Prentice Hall, Inc.
Deplaning
Baggage claim
Container offload
Pumping
Engine injection water
Container offload
Main cabin door
Aft cabin door
Aft, center, forward
Loading
First-class section
Economy section
Container/bulk loading
Galley/cabin check
Receive passengers
Aircraft check
Loading
Boarding
10
20
30
Time, Minutes
40
3 35
3 36
3 37
3 38
3 39
3 40
3 41
B
A
(b)
C
B
B
(c)
Figure 3.5
2008 Prentice Hall, Inc.
Activity
Meaning
A comes before
B, which comes
before C
A and B must both
be completed
before C can start
B and C cannot
begin until A is
completed
Activity on
Arrow (AOA)
A
A
B
C
B
C
3 42
(d)
(e)
B
Figure 3.5
2008 Prentice Hall, Inc.
Activity
Meaning
C and D cannot
begin until both
A and B are
completed
C cannot begin
until both A and B
are completed; D
cannot begin until
B is completed. A
dummy activity is
introduced in AOA
Activity on
Arrow (AOA)
A
C
Dummy activity
D
3 43
(f)
C
Activity
Meaning
B and C cannot
begin until A is
completed. D
cannot begin
until both B and
C are completed.
A dummy
activity is again
introduced in
AOA.
Activity on
Arrow (AOA)
A
Dummy
activity
D
C
Figure 3.5
2008 Prentice Hall, Inc.
3 44
AON Example
Milwaukee Paper Manufacturing's
Activities and Predecessors
Activity
A
Description
Build internal components
Immediate
Predecessors
A, B
D, E
F, G
Table 3.1
3 45
Activity A
(Build Internal Components)
Activity B
(Modify Roof and Floor)
Start
Start
Activity
Figure 3.6
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3 46
Start
Activities A and B
Precede Activity D
2008 Prentice Hall, Inc.
Figure 3.7
3 47
C
E
Start
H
G
Figure 3.8
3 48
Ro (M B
of od
/ F i fy
lo
or
)
C
4
(Construct
Stack)
Dummy
Activity
D
5
(Pour
Concrete/
Install Frame)
F
Co (In
nt sta
ro l l
ls
)
E
(Build Burner)
(B
C o ui
A
m ld I
po nt
ne ern
nt al
s)
H
(Inspect/
Test)
l
al n
t
s o
I( n luti e)
l ic
Po ev
D
Figure 3.9
3 49
3 50
Description
Time (weeks)
Build internal components
2
Modify roof and floor
3
Construct collection stack
2
Pour concrete and install frame
4
Build high-temperature burner
4
Install pollution control system
3
Install air pollution device
5
Inspect and test
2
Total Time (weeks)
25
Table 3.2
3 51
Earliest
Start
ES
EF
Latest
Start
LS
LF
Figure 3.10
2008 Prentice Hall, Inc.
Earliest
Finish
Latest
Finish
Activity Duration
3 53
Forward Pass
Begin at starting event and work forward
Earliest Start Time Rule:
If an activity has only a single immediate
predecessor, its ES equals the EF of the
predecessor
If an activity has multiple immediate
predecessors, its ES is the maximum of
all the EF values of its predecessors
ES = Max {EF of all immediate predecessors}
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3 54
Forward Pass
Begin at starting event and work forward
Earliest Finish Time Rule:
The earliest finish time (EF) of an activity
is the sum of its earliest start time (ES)
and its activity time
EF = ES + Activity time
3 55
EF = ES + Activity time
0
Start
3 56
Start
EF of A =
ES of A + 2
3 57
A
2
Start
ES
of B
EF of B =
ES of B + 3
3
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2
0
Start
0
0
3 59
2
0
Start
= Max (2, 3)
D
3
B
3
4
3 60
2
0
Start
0
0
B
3
3 61
2
0
Start
13
4
0
B
3
D
4
15
2
8
13
5
Figure 3.11
3 62
Backward Pass
Begin with the last event and work backwards
Latest Finish Time Rule:
If an activity is an immediate predecessor
for just a single activity, its LF equals the
LS of the activity that immediately follows
it
If an activity is an immediate predecessor
to more than one activity, its LF is the
minimum of all LS values of all activities
that immediately follow it
LF = Min {LS of all immediate following activities}
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3 63
Backward Pass
Begin with the last event and work backwards
Latest Start Time Rule:
The latest start time (LS) of an activity is
the difference of its latest finish time (LF)
and its activity time
LS = LF Activity time
3 64
2
0
Start
C
2
3
4
13
13
4
0
B
3
LS =3 LF
D Activity time
G
7
8
H
2
15
15
13
LF = EF
of Project
3 65
2
0
Start
10
F
3
7
13
8 of
LF =4 Min(LS
following activity)
13
13
B
3
D
4
H
2
15
15
13
3 66
2
0
Start
C
2
10
4
4
0
0
B
3
D
4
E
4
F
3
7
13
13
13
8
8
G
5
H
2
15
15
13
13
3 67
Start
C
2
10
0
1
B
3
D
4
E
4
F
3
7
13
13
13
G
5
H
2
15
15
13
13
3 68
or
Slack = LF EF
3 69
A
B
C
D
E
F
G
H
0
0
2
3
4
4
8
13
2
3
4
7
8
7
13
15
Latest
Start
LS
Latest
Finish
LF
Slack
LS ES
On
Critical
Path
0
1
2
4
4
10
8
13
2
4
4
8
8
13
13
15
0
1
0
1
0
6
0
0
Yes
No
Yes
No
Yes
No
Yes
Yes
Table 3.3
3 70
Start
C
2
10
0
1
B
3
D
4
E
4
F
3
7
13
13
13
G
5
H
2
15
15
13
13
3 71
ES EF Gantt Chart
for Milwaukee Paper
1
10 11 12 13 14 15 16
A Build internal
components
B Modify roof and floor
C Construct collection
stack
D Pour concrete and
install frame
E Build hightemperature burner
F Install pollution
control system
G Install air pollution
device
H Inspect and test
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3 72
LS LF Gantt Chart
for Milwaukee Paper
1
10 11 12 13 14 15 16
A Build internal
components
B Modify roof and floor
C Construct collection
stack
D Pour concrete and
install frame
E Build hightemperature burner
F Install pollution
control system
G Install air pollution
device
H Inspect and test
2008 Prentice Hall, Inc.
3 73
3 74
3 75
Expected time:
t = (a + 4m + b)/6
Variance of times:
v = [(b a)/6]2
3 76
Probability
Expected time:
Figure 3.12
t = (a + 4m + b)/6
Variance of times:
Probability of
v = [(b a)/6]2 Probability
1 in 100 of
< a occurring
of 1 in 100 of
> b occurring
Activity
Time
Optimistic
Time (a)
2008 Prentice Hall, Inc.
Most Likely
Time (m)
Pessimistic
Time (b)
3 77
Computing Variance
Activity
A
B
C
D
E
F
G
H
Optimistic
Most
Likely
Pessimistic
Expected
Time
Variance
t = (a + 4m + b)/6
[(b a)/6]2
1
2
1
2
1
1
3
1
2
3
2
4
4
2
4
2
3
4
3
6
7
9
11
3
2
3
2
4
4
3
5
2
.11
.11
.11
.44
1.00
1.78
1.78
.11
Table 3.4
3 78
Probability of Project
Completion
Project variance is computed by
summing the variances of critical
activities
p2 = Project variance
= (variances of activities
on critical path)
3 79
Probability of Project
Completion
Project variance is computed by
summing the variances of critical
Project variance
activities
Project variance
3.11 = 1.76 weeks
3 80
Probability of Project
Completion
PERT makes two more assumptions:
Total project completion times follow a
normal probability distribution
Activity times are statistically
independent
3 81
Probability of Project
Completion
Standard deviation = 1.76 weeks
15 Weeks
Figure 3.13
2008 Prentice Hall, Inc.
Probability of Project
Completion
What is the probability this project can
be completed on or before the 16 week
deadline?
Z = due expected date / p
date
of completion
Probability of Project
Completion
From Appendix I
What is the probability
can
.00
.01 this project
.07
.08
be completed
on or
before the
16 week
.1 .50000
.50399
.52790
.53188
deadline?
.2 .53983 .54380
.56749 .57142
.5
.6
.72575
.72907
= (16 wks
.74857
.75175
)/1.76
= (16 wks 15 wks
= 0.57
of completion
Probability of Project
Completion
Probability
(T 16 weeks)
is 71.57%
15
Weeks
16
Weeks
Time
Figure 3.14
2008 Prentice Hall, Inc.
3 85
Determining Project
Completion Time
Probability
of 0.99
Probability
of 0.01
From Appendix I
Figure 3.15
2008 Prentice Hall, Inc.
2.33 Standard
deviations
2.33
3 86
Variability of Completion
Time for Noncritical Paths
Variability of times for activities on
noncritical paths must be
considered when finding the
probability of finishing in a
specified time
Variation in noncritical activity may
cause change in critical path
3 87
3 88
3 89
3 90
Crash cost =
(Normal time Crash time)
per period
2. Using current activity times, find the
critical path and identify the critical
activities
3 91
3 92
3 93
A
B
C
D
E
F
G
H
2
3
2
4
4
3
5
2
1
1
1
2
2
2
2
1
Cost ($)
Crash Cost Critical
Normal
Crash Per Wk ($) Path?
22,000
30,000
26,000
48,000
56,000
30,000
80,000
16,000
22,750
34,000
27,000
49,000
58,000
30,500
84,500
19,000
750
2,000
1,000
1,000
1,000
500
1,500
3,000
Yes
No
Yes
No
Yes
No
Yes
Yes
Table 3.5
3 94
Crash
Crash Cost Normal Cost
Crash Cost/Wk = Normal Time Crash Time
$34,000
$33,000
$34,000 $30,000
31
$4,000
=
= $2,000/Wk
2 Wks
Crash
Cost $32,000
$31,000
$30,000
Normal
Cost
Figure 3.16
2008 Prentice Hall, Inc.
Normal
|
1
Crash Time
|
2
|
3
Normal Time
Time (Weeks)
3 95
Start
A
2
Slack = 0
10
Slack = 0
4
4
0
1
B
3
Slack = 1
2008 Prentice Hall, Inc.
D
4
7
8
Slack = 1
E
4
F
3
7
13
Slack = 6
13
Slack = 0
13
8
8
G
5
13
H
2
15
15
Slack = 0
13
Slack = 0
Figure 3.17
3 96
Advantages of PERT/CPM
1. Especially useful when scheduling and
controlling large projects
2. Straightforward concept and not
mathematically complex
3. Graphical networks help highlight
relationships among project activities
4. Critical path and slack time analyses help
pinpoint activities that need to be closely
watched
2008 Prentice Hall, Inc.
3 97
Advantages of PERT/CPM
5. Project documentation and graphics
point out who is responsible for various
activities
6. Applicable to a wide variety of projects
7. Useful in monitoring not only schedules
but costs as well
3 98
Limitations of PERT/CPM
1. Project activities have to be clearly
defined, independent, and stable in their
relationships
2. Precedence relationships must be
specified and networked together
3. Time estimates tend to be subjective and
are subject to fudging by managers
4. There is an inherent danger of too much
emphasis being placed on the longest, or
critical, path
2008 Prentice Hall, Inc.
3 99
3 100
Program 3.1
2008 Prentice Hall, Inc.
3 101
Program 3.2
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3 102
Program 3.3
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3 103
Program 3.4
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3 104
Program 3.5
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3 105
Program 3.6
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3 106
Program 3.7
3 107