chap017

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Chapter 17 - Project Management
CHAPTER 17
PROJECT MANAGEMENT
Teaching Notes
In managing operations, we are often faced with activities that do not fit into the usual day-to-day
operations of the firm. These non-typical, unusual activities of the firm are called projects. Therefore
typical daily, weekly or monthly activities of a firm involving scheduling, quality control, purchasing, etc.
are not categorized as projects. Due to their unique nature, projects require different management
approaches and techniques. A list of project examples is given below:
1.
Installation of a new bar coding system
2.
Installation of a new computerized production and inventory control system
3.
Design and development of a product prototype
4.
Feasibility study to decide whether to buy new machinery
5.
Acquisition and installation of a new CNC (Computer Numerically Controlled) machinery
6.
Conversion of the plant layout from process layout to group technology layout.
7.
Selection of a new plant site
8.
Construction of a new facility
9.
Planning, organizing and managing a professional conference or a trade show
10.
Planning organizing and managing major sports events such as Olympics, sports festivals, NCAA
basketball tournament, etc.
Project Management involves planning, controlling and directing the unusual activities facing the firm. In
managing projects, temporary project teams are formed to schedule the work, to adhere to a given budget,
and to monitor the progress of the work through its various stages. For larger projects, project teams are
formed. These project teams may include workers from the company involved in the project as well as
other external companies (i.e. consulting firm). Depending on the size and type of the project, an internal
project leader and possibly project team members may receive full or partial release from their regular
duties. The duty release is given because it would be very difficult for an employee to manage the
responsibilities of a time consuming project and also to fulfill the responsibilities of normal day-to-day
activities.
Projects are not necessarily single-time events. They can be repeated in similar settings. In managing a
project, the project team is usually responsible for managing and controlling the following four factors:
1.
The length of project completion time
2.
Resources
3.
Quality
4.
Cost
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Chapter 17 - Project Management
The project plan is generally prepared well before actual project work begins. The first phase of the
project needs to include a clear statement of goals and objectives of the project. The next phase involves
composing a detailed definition of the project. Then, using the Work Breakdown Structure, the project is
decomposed into tasks or activities. Once all of the unique tasks making up the project are identified,
specific time, cost and resource estimates are obtained for each task.
In planning and controlling the project, the project team’s major duty is to ensure timely progression of
the project through various stages without exceeding the approved cost standards while achieving the
desired level of quality. The project team usually prepares progress reports during different stages of the
project for upper management and possibly for external sources playing a major role in the project. The
interim project progress report assists in ensuring that the project team’s actions are consistent with the
original goals and objectives of the project and the project is continuing according to plan. If the project is
delayed or major changes had to be made, the interim progress report also allows the project manager to
explain the reasons for deviations from the original plan. In addition, the interim progress report also
gives upper management a chance to consider and possibly approve the proposed changes.
Answers to Discussion and Review Questions
1.
To effectively manage a project, a project manager must employ a certain set of skills. For
projects that involve fairly well-defined work, the project manager must be able to
a. motivate his or her team.
b. direct team members in specific work areas of the project.
c. solve specific project related problems.
d. resolve issues and problems between co-workers.
e. communicate certain problems to upper management.
f.
expedite work when necessary.
g. coordinate work among the team members and among the appropriate outside contractors.
h. make the necessary project trade-off decisions involving cost, time, quality and resources.
However, if the work is not well defined, there is usually more uncertainty involved. In projects
involving a higher degree of uncertainty, in addition to being able to perform the functions listed
above, the project leader must also demonstrate strong leadership skills. The more ill-defined the
work, the higher the need for leadership skills. Leadership skills are less tangible than the skills
listed above and may include the following:
a. ability to deal with change.
b. deciding what type of changes are needed and when to make the change or changes.
c. working with the project team to make the necessary change or changes.
d. the ability to handle undesirable or unexpected consequences of making the change.
e. ability to manage people with varying background and skills who may also be reporting to
other managers in their respective functional areas.
f.
ability to persuade and cooperate with others to fulfill project goals since the project manager
may not have the formal authority to accomplish some of the goals of the project.
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Chapter 17 - Project Management
2.
Project champion is the person who is from within the company specifically designated to support
the project. The project champion can be instrumental in facilitating the work of the project
manager by promoting the project to other managers who might be asked to share resources with
the project team. The project champion also promotes the benefits of the project to employees
who may be asked to work on portions of the project. Since the project champion plays a very
important role in facilitating the project, both the project manager and the project team needs to
keep him or her informed and involved about the status of the project. Possible benefits of the
project need to be communicated to the project champion so that he or she is knowledgeable
about the project to be able to successfully promote it to others involved.
3.
The steps in risk management are:
a. Identification of risks.
b. Assessment and evaluation of risks.
c. Risk reduction.
-
Contingency plans.
-
Risk sharing.
-
Backup systems.
-
Risk transfer.
-
Early identification and elimination of problems.
4.
Choose good people, model appropriate behavior, monitor team members’ behavior, and
investigate any allegations of unethical conduct.
5.
The advantages of using project management software include the following:
a. It imposes a methodology and a common project management technology.
b. It provides a logical planning structure.
c. It can enhance communication among team members.
d. It can automatically flag the occurrence of constraint violations.
e. It automatically formats reports.
f.
It can generate multiple levels of summary reports and detailed reports.
g. It enables what-if scenarios and what-if analysis.
h. It can generate various chart types, including basic Gantt charts.
6.
Work Breakdown Structure (WBS) is a hierarchical listing of what must be done during the
project. It breaks down the entire project into manageable smaller portions called activities or
tasks. WBS is important because it establishes a logical framework for identifying the required
activities of the project.
7.
a. A path
e. Beta distribution
b. The critical path
f. Normal distribution
c. Dummy activity
g. Crashing
d. Path slack
8.
The primary advantages of PERT are:
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Chapter 17 - Project Management
a. The PERT chart helps managers to visualize the project.
b. Planners must identify major activities and define sequential relationships.
c. Potential trouble spots become apparent.
d. Areas of weak or nonexisting information (e.g., time estimates) tend to be more easily
recognized with a formal technique like PERT.
e. Reallocation of resources to shorten project time is facilitated through computation of slack
times.
The primary limitations of PERT are:
a. Important activities may be overlooked when developing the project network.
b. Errors may occur in designating precedence relationships.
c. Time estimates may be incorrect.
d. Large networks require the use of a computer which might not be available.
9.
Near-critical paths can have distributions which overlap the distribution of critical path time,
which may result in a lower probability of timely completion than that based solely on the time
distribution of the critical path. Where overlap is not a factor, probabilistic estimates based solely
on the critical path are acceptable.
10.
a. Expected activity time is a weighted average of optimistic, most-likely, and pessimistic time
t o  4t m  t p
for each activity: Te 
6
b. Variance of an activity measures the extent of activity variability.
Variance 
(t p  t o )2
36
c. The standard deviation of a path’s time is a measure of the extent of variability of path time.
It is computed by summing the variances of activities which comprise the path and then
taking the square root of that sum.
11.
The critical path generates more attention than other paths. Hence, those associated with activities
which are on the critical path are often in the spotlight. If they perform well, there is a good
possibility for recognition and reward. However, there can be an inordinate amount of pressure
associated with the critical path activities, and some would just as soon avoid that pressure.
12.
Projects can offer a change of pace, a chance to do new work, meet new people and new
challenges. If the project is successful, certain rewards, recognition and perhaps new
opportunities may present themselves. Conversely, an unsuccessful project may bring an
unfavorable impression. In addition, after the project is terminated, it may be difficult to return to
one’s former slot in the organization. And, if one is involved with the project on a part-time basis,
conflicts may arise between the regular work and project work.
13.
Authority may not be commensurate with responsibility, time and funding pressures may be
large, the environment is often more dynamic than with more routine jobs, there may be a much
wider range of skills among subordinates, and conflicts may arise between project workers and
those not involved with the project (e.g., other projects, nonproject work).
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Chapter 17 - Project Management
14.
The project organization permits a narrower focus on activities related to a project than a more
traditional form of organization would.
Taking Stock
1.
When contractors responsible for the completion of certain activities for a given project
determine the completion time estimates, they assume normal operating conditions, thus normal
cost. If for one reason or another, the activity and the project completion times have to be
accelerated, then obviously the cost estimates have to be adjusted upwards because of possible
expediting of work, the use of overtime, etc.
2.
The project manager, specialized project personnel dedicated to handle certain portions, activities
or aspects of a project, someone from the finance department, and someone from the upper
administration or management must be involved in assessing the cost of a project.
3.
a. Project management software: As the project management software gets more and more
sophisticated, the ability of a project manager to manage, direct and control different aspects
of management gets easier.
b. Internet and e-mail: The ability to obtain quotes and prices on the Internet provided a
significant convenience and reduced the negotiation times for various activities, making the
prices of activities more competitive.
Critical Thinking Exercise
1. The project management techniques are designed to handle unusual or atypical activities. They do not
lend themselves very well in managing the day-to-day activities of organizations. Projects by definition
are different than normal operations of the firm. They are usually not repeated, very expensive to design
and develop due to their unique and special characteristics. Since business managers have experience
dealing with the normal, day-to-day activities, they can utilize many of the existing, well-known
techniques and methods designed to manage day-to-day operations of the firm or solve typical problems
faced by the firm. Utilization of project management techniques in managing the normal functions of a
business will not only result in a lot of waste of time and resources, it may not provide satisfactory results
in a timely fashion.
Memo Writing Exercises
1.
Work Breakdown Structure (WBS) is a hierarchical listing of what must be done during the
project. WBS is important because it establishes a logical framework for identifying the required
activities of the project.
2.
In a part-time capacity, the employee will continue to perform his/her regular duties and join the
project team as well. The employee may be concerned about reporting to two different managers
(functional department manager and project manager). As a result, it is possible there might be
work overload and/or priority conflicts. In a full time capacity, the employee would be
completely relieved from his/her regular position, so that he/she can fully execute the
responsibilities as a project team member. Being away from his/her regular job can reduce
his/her chances for advancement, promotions, and it does not allow him/her to participate in intradepartment activities and/or decision-making.
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Chapter 17 - Project Management
3.
The advent of technology made it much easier to manage projects. First and foremost, the use of
project management software presents many different benefits and conveniences for project
teams and project managers. Some of these benefits are listed below:
a. It imposes a methodology and a common project management technology.
b. It provides a logical planning structure.
c. It can enhance communication among team members.
d. It can automatically flag the occurrence of constraint violations.
e. It automatically formats reports.
f.
It can generate multiple levels of summary reports and detailed reports.
g. It enables what-if scenarios and what-if analysis.
h. It can generate various chart types, including basic Gantt charts.
In addition to project management software, other software packages such as Computer Assisted
Design (CAD) can easily produce updated prototypes on construction and product development
projects (i.e., design of a large cruise ship). Other technological advances in telecommunications
provide the ability for team members to work on a project from separate locations through
teleconferencing, e-mail, and on-line communication. The software that permits remote viewing
of projects allows those members of the team at different locations a close-up view of the
progress and problems associated with the project.
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Chapter 17 - Project Management
Solutions
1.
a.
Expected
Path Time
Path
1–2–4–7–10–12
23
1–2–5–8–10–12
24
1–3–6–9–11–12
31*
b.
Expected
Path Time
Path
1–2–4–6–8–9
41
1–2–5–6–8–9
48
1–2–5–7–8–9
55*
1–3–7–8–9
40
c.
Expected
Path Time
Path
2.
1–2–5–12–16
44*
1–3–6–13–16
39
1–3–7–14–16
41
1–4–8–9–10–11–15–16
35
1–4–8–10–11–15–16
38
a.
Choose topic
Library res.
Outline
Shop
Select
Install
Write Paper
Grammar ck
Submit paper
b. 1. AOA diagram
Library
Choose
.6
Start
.4
Shop
2
Outline
2
Install
Select
.8
1
17-7
Write
Grammar
Submit
3
.5
.2
End
Chapter 17 - Project Management
2. AON diagram
Choose
Library
Outline
Start
Write
Shop
c. 7.5
Select
Install
Shop, Select, Install, Write, Grammar, Submit
d. Parallel paths.
17-8
Grammar
Submit
End
Chapter 17 - Project Management
Blank forms to distribute to students if desired:
3a. Bank location.
Activity
1-2
1-3
2-4
2-5
3-5
4-5
5-6
2
4
6
8
Weeks after start
10
12
14
4
6
8
10
Weeks after start
12
14
16
18
4
6
8
10
Weeks after start
12
14
16
18
4
6
8
10
Weeks after start
12
14
16
18
16
18
20
b. Solved problem #2.
Activity
1-2
2-5
2-4
1-3
3-4
4-5
2
3. a. Bank location.
Activity
1-2
1-3
2-4
2-5
3-5
4-5
5-6
2
b. Solved Problem #2.
Activity
1-2
2-5
2-4
1-3
3-4
4-5
2
17-9
20
Chapter 17 - Project Management
4. a.
C
Start
A
E
Dummy
B
D
Activity
Immediate
Predecessor
A
B
C
D
E
End
–
–
A
A,B
C
D,E
4.
b. Case 1: Activity-on-Node diagram
a
d
k
Start
b
e
End
f
c
h
g
i
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Chapter 17 - Project Management
Case 2: Activity-on-Node diagram
l
m
n
p
j
k
r
v
Start
s
End
q
t
w
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Chapter 17 - Project Management
5.
a.
21
13
12
4
11
4
7
0
2
LS
ES
26
18
7
4
2
2
7
1
28
20
10
8
11
4
4
5
26
18
9
19
12
0
0
21
13
26
19
26
19
19
12
3
28
21
8
5
28
21
12
6
10
11
10
10
3
5
6
4
10
10
9
6
16
16
20
20
20
20
16
16
Summary:
Activity
1–2
ES
0
EF
4
LF
11
LS
7
Slack
7
2–4
4
13
21
12
8
4–7
13
18
26
21
8
7–10
18
20
28
26
8
10–12
21
24
31
28
7
2–5
4
12
19
11
7
5–8
12
19
26
19
7
8–10
19
21
28
26
7
1–3
0
10
10
0
0
3–6
10
16
16
10
0
6–9
16
20
20
16
0
9–11
20
25
25
20
0
11–12
25
31
31
25
0
17-12
31
24
25
25
25
25
31
31
LF
EF
Chapter 17 - Project Management
5.
b.
Summary:
Activity
1
ES
0
EF
5
LS
0
LF
5
Slack
0
2
5
23
5
23
0
3
5
18
20
33
15
4
23
26
37
40
14
5
23
33
23
33
0
6
33
37
40
44
7
7
33
44
33
44
0
8
44
53
44
53
0
9
53
55
53
55
0
LS
ES
37 40
23 26
5 23
5 23
4
LF
EF
40 44
33 37
3
6
2
23 33
23 33
18
0
0
5
5
4
5
44 53
44 53
10
53 55
53 55
1
5
20 33
5 18
3
33 44
33 44
7
13
11
17-13
8
9
9
2
Chapter 17 - Project Management
5.
c.
Activity
1–2
ES
0
EF
15
LF
16
LS
1
Slack
1
2–4
15
27
28
16
1
4–7
27
33
34
28
1
7–9
33
36
37
34
1
4–9
27
32
37
32
5
1–3
0
8
8
0
0
3–6
8
16
30
22
14
6–9
16
23
37
30
14
3–5
8
17
17
8
0
5–8
17
31
31
17
0
8–9
31
37
37
31
0
LF
EF
LS
ES
28
27
16
15
16
15
1
0
34
33
28
27
b
0
0
37
36
e
5
15
a
1
3
d
32
27
2
34
33
c
4
12
7
6
37
32
9
37
23
i
30
16
22
8
f
8
8
8
8
8
6
8
g
3
7
k
30
16
6
h
8
9
j
17
17
5
14
17
17
17-14
31
31
31
31
37
37
Chapter 17 - Project Management
6.
The network diagram is given in Problem 1, Part a.
For path 1–2–4–7–10–12, the 13 weeks required for 1–2–4 has been reduced to 12 weeks. On
path 1–2–5–8–10–12, the 12 weeks required for 1–2–5 has been increased to (about) 14 weeks
[12+(8–6)]. However, 1–2–5–8–10–12 is not along the critical path and has a slack of 7 weeks.
Along path 1–3–6–9–11–12, the 13 weeks required to complete 1–3 and half of 3–6 has been
reduced to 12 weeks; a reduction of one week along the critical path.
The project may be completed in (31–1) = 30 weeks, if all following activities are completed
according to the original estimate.
7.
5
c
a.
e
2
a
d
Start
3
f
g
8
1
b
i
4
b.
End
6
Activity
a
b
c
d
e
f
g
h
i
te
6
8.5
8.17
12
6.33
6
3.5
4.17
6.83
2
4/36
9/36
25/36
36/36
16/36
4/36
25/36
1/36
9/36
h
7
Path
a–c–e
d–f–g
b–h–i
Expected
Duration
20.5
21.5
19.5
For 21
(21 – 20.5)
1.118
Std.
Dev.
1.118
1.344
0.726
= .447  0.45
24
3.13
1.86
6.19
Prob.
0.9991
0.9686
1.0000
Probability
0.6736
(21 – 21.5)
1.344
= –0.3721  –0.37
0.3557
(21–19.5)
0.7265
= 2.065  2.07
0.9808
0.6736 x 0.3557 x 0.9808 = 0.235
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Chapter 17 - Project Management
c. On the 8th day, the network could be reviewed as follows:
*Assume it is the beginning of the 8th day
5
c (8.17)
8th
day
1
e (6.33)
d (6)
3
f (6)
g (3.5)
6
h (4.17)
8
i (6.83)
7
Replace d by d and merge nodes (2) and (4) with (1).
d: te = 6: 2 = 4/36
7 days were used to complete activities a, b and one half of d. In the modified network:
Expected Duration
Expected duration from
Path
from 8th day
the start of the project
Variance
1. c–e
14.50
14.50 + 7 = 21.5
41/36
2. d–f–g
15.5
15.5 + 7 = 22.5
33/36
3. h–i
11
11 + 7 = 18
10/36
Path
1. c–e
Standard Dev.
1.0672
2. d–f–g
0.9574
3. h–i
0.5270
Z24
24 – 21.5
= 2.343
1.0672
24 – 22.5
= 1.567
0.9574
24 – 18
= 11.384
0.527
Probability (24)
.9904
.9418
1.0000
.9904(.9418)(1.0000) = .9328
Path
1. c–e
2. d–f–g
3. h–i
Z21
21 – 21.5
= –0.469
1.0672
21 – 22.5
= –1.567
0.9574
21 – 18
= 5.692
0.527
Probability (21)
0.3192
0.0582
1.0000
.3192 (.0582)(1.0000) = 0.0186
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Chapter 17 - Project Management
d.
Crash activities F, C, and G one day each for a total cost of $23,000. Decide if an additional
expenditure of $3,000 over budget would be worth the cost, or if it would be better to crash only
one day (Activity F for a cost of $7,000), or don’t crash at all.
8.
Path
Expected
Duration
10
8
12
15
14
A
B
C
D
E
Std. Dev.
Z16
Z15
Z13
1.1
1.414
1.
1.7
1.2
5.45
5.66
4
0.59
1.67
4.55
4.95
3
0
0.83
2.73
3.54
1
–1.18
–0.83
(a) Prob. (T  16) = 1 x 1 x 1 x 0.7224 x 0.9525 = 0.6881
(b) Prob. (T  15) = 1 x 1 x 1 x 0.50 x 0.7977 = 0.3984
(c) Prob. (T  13) = .9968 x 1 x 0.8413 x .1197 x .2023 = .0203
9.
Solution
Path
1–2–3
1–3
Expected
duration
4+5=9
8
Std. dev.
1.64
1.60
z
0.61
Probability
.7291
1.25
.8944
P(duration  10 weeks): 1 – .7291 (.8944) = .3479
10.
Solution
a.
Path
1–2–4
Expected
duration
4 + 6 = 10
Std. Dev.
1.14
z for 11 wk.
0.88
1–3–4
3 + 9 = 12
2.00
–0.50
Probability
.8106
.3085
P(duration  11 weeks): .8106(.3085) = .2501. Yes, the manager should be concerned
because the probability of finishing on schedule is only about .25.
b.
Expected
Path
duration
Std. dev.
z for 12 wk.
Probability
1–2–4
4 + 6 = 10
1.14
1.75
.9599
1–3–4
3 + 9 = 12
2.00
0
P(duration  12 weeks) = 1 – .9599(.5000) = .52.
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.5000
Chapter 17 - Project Management
11.
Project Management
a.
Path
1–2–3–8–11
Mean
37.34
Var.
1.056
Std. Dev.
1.027
z49
11.35
Prob.
1
z46
8.43
Prob.
1
1–2–4–6–11
43
5.11
2.26
2.65
.996
1.33
.9082
1–2–4–7–11
40
0.8056 0.898
10.02
1
3.34
1
1–2–5–10–9–11
46.83
1.25
1.94
.9738
1.118
b. P(T  49 wk.) = 1 – [(.9738) (.996)] = .0301
c. P(T  46 wk.) = .9082 (.2296) = .2085
17-18
–0.74
.2296
Chapter 17 - Project Management
d
e
12.
f
a
h
g
End
Start
k
b
i
j
o
c
m
Activity
a
Expected
Duration
4.
Path
Mean
n
Variance
16/36
d
8.
e
9.17
h
3.17
9/36
f
4.5
25/36
g
7.
24.34
15.5
16/36
25/36
16/36
4.[a]
16/36
b
2.17
1/36
i
3.33
j
4.
k
5.33
16/36
c
8.17
49/36
m
1.
n
7.5
o
9.5
14.83
26.17*
16/36
4/36
0
25/36
25/36
*critical path duration
17-19
Path
Variance
Path Std.
Dev.
1.83
1.354
1.58
1.258
1.03
1.014
2.75
1.658
Chapter 17 - Project Management
Path
a–d–e–h
Mean
24.34
Std. Dev.
1.354
z27
1.96
Prob.
.9750
z26
1.23
Prob.
.8907
a–f–g
15.5
1.258
9.14
1.0000
8.35
1.0000
b–i–j–k
14.83
1.014
12.00
1.0000
11.00
1.0000
c–m–n–o
26.17
1.658
.50
.6915
–0.10
.4602
Prob. ($500): .9750(1.0000)(1.0000)(.6915) = .6742
Prob. ($1000): .8907(1.0000)(1.0000)(.4602) = .4099
13.
Activity
Duration (wk.)
1-2
2-4
4-7
1-3
3-4
1-5
5-6
6-7
5
6
3
3
7
5
5
5
first crash
second crash
$8 #2
7
14 #3
9
8
10 #1
11 #2
12 #3
$10
9
15
11
9
15
13
14
6
2
4
3
5
7
7
3
3
1
5
6
5
5
5
17-20
Chapter 17 - Project Management
Path
1-2-4-7
1-3-4-7
1-5-6-7
Initial time
14 wk.
13 wk.
15 wk.
After first crash
14 wk.
13 wk.
14 wk.
First Crash
Activity
Cost
1-5
$10
Second Crash
Activity
Cost
2-4
$7
5-6
11
$18
After second crash
13 wk.
13 wk.
13 wk.
After third crash
12 wk.
12 wk.
12 wk.
Third Crash
Activity
Cost
4-7
$14
6-7
12
$26
B
14.
14
A
12
Start
K
9
End
M
3
N
C
10
G
D
17
15
11
E
18
F
12
8
H
8
J
12
I
7
Path
A–B–K
P
Length after crashing N weeks
N:
0
1
2
35
3
4
5
42
40
C–E–H–P
44
43
42
42
C–D–G–M
45
44
43
43
C–E–H–N
47
46
45
45
45
44
C–F–I–J–P
49
48
47
46
45
44
Activity
Crashed
–
c
c
f
f
e,p
Cost
–
$5,000
5,000
12,000
15,000
36,000
Cum. Cost
–
$5,000
10,000
22,000
37,000
73,000
17-21
Chapter 17 - Project Management
15.
Activity
1–2
1st week
$18 [2]
2nd week 3rd week
$22 [6]
–
2–5
24
25
25
5–7
30
30
35
7–11
15 [1]
20 [3]
–
11–13
30 [4]
33 [5]
36
1–3
12 [6]
24
26
3–8
–
–
–
8–11
40
40
40
3–9
3
10
12
9–12
2
7
10
12–13
26
–
–
1–4
10 [5]
15
25
4–6
8 [4]
13
–
6–10
5 [3]
12 [6]
–
14
15
–
10–12
1
2
$18
15
Weeks Crashed
3
4
5
6
$22
20
30
33
12
10
8
5
$15
Path
1–2–5–7–11–13
0
35 wk.
1–3–8–11–13
32
1–3–9–12–13
20
1–4–6–10–12–13
33
17-22
$18
1
34
$25
12
$38
$43
$46
Weeks Crashed
2
3
4
33
32
31
5
30
6
29
32
31
30
29
32
31
30
29
33
Chapter 17 - Project Management
Summary:
Project
Cum. wk.
Length Shortened
35
0
Cum. Crash
Costs ($0000)
0
Indirect Costs
($000)
35(40) = 1,400
Total Cost
($000)
1,400
34
1
15
34(40) = 1,360
1,375
33
2
33
33(40) = 1,320
1,353
32
3
58
32(40) = 1,280
1,338
31
4
96
31(40) = 1,240
1,336
30
5
139
30(40) = 1,200
1,339
29
6
185
29(40) = 1,160
1,345
1,400
Total
Cost
($000)
1,300
0
30
31
32
33
34
Product Length
(wk)
17-23
35
Chapter 17 - Project Management
16.
Start
7
L
125, -
9
K
410, 415
4
M
300, 350
5
N
45, 45
8
P
-, -
5
Q
200, 225
6
J
50,-
7
Y
85, 90
6
Z
90, -
Project duration = 39 wk
Project
Shorten
Crash
length
activity
cost
39 wk
–
0
38
Z
90
37
N, L
36
Q
200
35
Q
225
34
M, N
345
170 = (125 + 45)
Stop here; additional crashing will cost more than the $375 weekly penalty.
17.
a. 18.5 (See table in part b.)
b.
Path
1-2-4-6
Expected Duration
5+8.17 +5.33 = 18.5
Standard Deviation
1.17
Z17
–.43
Probability
.3336
1-3-5-6
8.33 + 3 + 3.83 = 15.16
1.12
2.54
.9945
1 – .3336(.9945) = .6682 or approximately .67.
17-24
En
d
Chapter 17 - Project Management
18.
Event Probability
1
.25
2
.35
3
.20
4
.80
5
.10
6
.40
7
.60
Cost ($000) Exp. Cost
15
25
55
10
77
55
50
3.75
8.75
11.00
8.00
7.70
22.00
30.00
80
5
60

3
6
7
40
Cost
2
20
1
0
4
.50
.75
1.00
Probability of Occurring
.25

The manager should probably be most concerned about event #7, which has a greater than 50%
chance of occurring and a relatively high cost. (Note its expected cost in table above is the highest.)
19.
200
2
160

3
120
Cost
80
5
40
1
0
.25
6
.50
.75
4
1.00
Probability of Occurring

The weather problems (4) and funding delays (5) are placed conservatively (i.e., using the worst likely
probabilities).
17-25
Chapter 17 - Project Management
Case: The Mexican Crazy Quilt
The case combines behavioral considerations in project management with development of a foreign
subsidiary. Although some students will have minor problems getting all the names straight, I think you
will find that the case produces good discussion as well as a realistic view of the sorts of difficulties often
encountered on projects.
1.
Very definitely. This was a one-time, unique effort requiring the planning and coordination of
diverse activities leading up to getting the Mexican subsidiary on-line. Much of the work cut
across functional boundaries.
2.
Naturally, the division managers would be opposed to releasing their best people to work on the
project. In fact, while the project might be important to top management, the division managers
undoubtedly had different priorities based on how they were evaluated, not on the success or
failure of this particular project. Rather, their evaluations would concern ongoing sorts of things
directly related to their divisions.
3.
Many people are quite content to work in a stable environment, where there is little chance of
unexpected events that might upset the established routine. These people are risk-adverse; they
are fully content to operate in a nonchanging environment. Moreover, experienced workers might
have witnessed similar projects that involved project personnel leaving the organization or
moving into less desirable jobs once the project had been completed. Thus, Bert Mill might have
wanted to avoid that possibility.
4.
Conway realized that he might “go to the well” once too often: not every argument would be
decided in his favor. Moreover, he undoubtedly recognized that these arguments stirred up a
certain amount of resentment which would bode ill for any future dealings he might have with
these people. In fact, that is just what happened when he took the disagreement that engineer Bob
Cates was having with the Mexican engineer on layout to Bob’s former boss, Sam Sargis.
5.
To begin with, firms must recognize the potential problems, and then set up a mechanism to deal
with them before they are full-blossomed. One possible approach to the problem might be to
rotate people in and out of the project. This would involve shorter absences from their regular
jobs. On that basis, more people like Bert Mill might be willing to work on the project. In
addition, more people would have an opportunity to expand their horizons. Practically speaking,
it is the responsibility of top management to encourage division managers to support projects
such as this one. Without top management pushing this, there will be continual friction between
division managers and project managers.
17-26
Chapter 17 - Project Management
Case: Time, Please
Critical path is the longest path, therefore expected completion time of the project is 14 weeks.
.45
14
17.29
0
1.645
Time (weeks)
Z
ETp + Zp = 14 + (1.645)(2) = 17.29 weeks
Justification:
Path A has a higher standard deviation then path B. If we base the project completion time on path A,
then the estimated completion time (due date) of 16.58* weeks will not result in a 95% chance of
completing the project by the due date. If Smitty uses 16.58 weeks as the estimated project completion
time, we can only be 90.15%** certain of completing the project on or before the due date of 16.58
weeks. Therefore, 17.29 weeks should be stated as the estimated project completion time.
* 10 weeks + 1.645 (4) = 16.58 weeks
** Z = (16.58 – 14) / 2 = 1.29 and P(Z < 1.29) = .5 + .4015 = .9015 = 90.15%.
17-27
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