18-1 Project Management

PART
PROJECT SIX

•Chapter MANAGEMENT
Eighteen
•Project Management

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-2 Project Management

Chapter 18

Project
Management

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-3 Project Management

Projects

JAN FEB MAR APR MAY JUN

Build A

A Done

Build B

B Done

Build C

C Done
On time!
Build D

Ship

Unique, one-time operations designed to accomplish a

specific set of objectives in
a limited time frame.
Operations Management, Seventh Edition, by William J. Stevenson
McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-4 Project Management

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

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-5 Project Management

Project Manager
Responsible for:

Work Quality
Human Resources Time
Communications Costs

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-6 Project Management

Ethical Issues

• Temptation to understate costs

• Withhold information
• Misleading status reports
• Falsifying records
• Comprising workers’ safety
• Approving substandard work

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-7 Project Management

Project Life Cycle

Feasibility

Management
Planning
Concept
Execution

Termination

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-8 Project Management

Project Risk
• Risk: occurrence of events that have
undesirable consequences
– Delays
– Increased costs
– Inability to meet specifications
– Project termination

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-9 Project Management

Risk Management

• Identify potential risks

• Analyze and assess risks
• Work to minimize occurrence of risk
• Establish contingency plans

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-10 Project Management

Work Breakdown Structure

Figure 18-3

Project
Project X
X

Level 1

Level 2

Level 3

Level 4

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-11 Project Management

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

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-12 Project Management

PERT and CPM

PERT: Program Evaluation and

Review Technique
CPM: 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

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-13 Project Management

Project Network – Activity on Arrow

Order
furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move
in
Interview
Hire and
train
3

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-14 Project Management

Project Network – Activity on Node

Order
furniture
Locate Furniture
2 setup
facilities

1 6
Move
Remodel
in

S 5 7

Hire and
Interview
train

3 4

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-15 Project Management

Network Conventions

a
b
c a

c
b

a c
a c

b Dummy
activity
b d

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-16 Project Management

Example 1

6 weeks
4
rd er e
O i tu r

Fur p
n 3 weeks
fu r

set
8 weeks 2

n i tu
u
Rem
ate s od e

re
c
Lo ilitie 11 weeks
l Move
fac in
1 5 6
In 1 week
er t ain
r
vi dt
4 weeks ew an
re
Hi 9 weeks

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-17 Project Management

Example 1 Solution

Critical Path

P a t h L e n g t h S la c k
( w e e k s )
1 - 2 - 3 - 4 - 5 1 - 86 2
1 - 2 - 5 - 6 2 0 0
1 - 3 - 5 - 6 1 4 6

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-18 Project Management

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

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-19 Project Management

Probabilistic Estimates
Figure 18-8

o m te p

Activity Optimistic Most likely Pessimistic

start time time (mode) time

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-20 Project Management

Example 5

Optimistic Most likely Pessimistic

time time time

2-4-6
b

2- c
- 4

3-
-3

5
1 a
3-4-5 3-5-7 5-7-9
d e f
6
2- g

4 -
3-

-
3 i
6

4-6-8
h

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-21 Project Management

Example 6
17
Weeks
1.00
a-b-c
Weeks
10.0

d-e-f
Weeks
16.0

1.00
g-h-i
13.5 Weeks

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-22 Project Management

Technology
• Computer aided design (CAD)
• Groupware (Lotus Notes)
• Project management software
– CA Super Project
– Harvard Total Manager
– MS Project
– Sure Track Project Manager
– Time Line

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-23 Project Management

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

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-24 Project Management

Time-Cost Trade-Offs: Crashing

Figure 18-11

Total
cost

Expected indirect costs

Shorten

Cumulative CRASH
cost of
crashing
Shorten

Optimum

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-25 Project Management

Example 7

10
6 b
a
2
f
5

9
c

e
4
d

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-26 Project Management

Advantages of PERT

• Forces managers to organize

• Provides graphic display of activities
• Identifies
– Critical activities 4
2
– Slack activities
1 5 6

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
18-27 Project Management

Limitations of PERT
• Important activities may be omitted
• Precedence relationships may not be
correct 4
• Estimates may include 2
a fudge factor
1 5 6

142 weeks

Operations Management, Seventh Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.