Chapter Four
McGraw-Hill/Irwin
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
4–1
• LO4–2: Analyze projects using network-planning
models.
• LO4–3: Evaluate
management.
projects
using
earned
• LO4–4: Exemplify how these techniques
implemented in commercial software packages.
value
are
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
• LO4–1: Explain what projects are and how projects
are organized.
4–2
– A series of related jobs, usually directed toward some
major output and requiring a significant period of time to
perform.
• What is project management?
– Planning, directing, and controlling resources (people,
equipment, material, etc.) to meet the technical, cost,
and time constraints of the project.
• Why is project management important?
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• What is a project?
– At the highest levels of an organization, management
often involves juggling a portfolio of projects.
4–3
• Major Characteristics of a Project
– Has an established objective
– Has a defined life span with a beginning and an end
– Requires across-the-organizational participation
– Involves doing something never been done before
– Has specific time, cost, and performance requirements
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A complex, non-routine, one-time effort limited by time,
budget, resources, and performance specifications
designed to meet customer needs.
4–4
Every project has one or more defined objectives, like
building 12-storey apartment complex by Jan 1, 2025, releasing
version 2.0 of a specific software package as quickly as
possible.
This purpose/s has/have often lacked in daily organizational
activities which are usually repetitive.
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• Defined Objective
4–5
Projects have defined start point and end point.
This is different from ongoing duties and responsibilities of
traditional jobs.
In many jobs, individual move from one project to the next as
opposed to staying in one job.
After helping to construct a desalination installation along the
gulf of Mexico, an engineer may next be assigned to construct
an oil refinery plant in Malaysia.
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• Defined Beginning and End
4–6
- Projects typically require the combined efforts of a variety of
specialists.
- Instead of working in separate offices under separate
managers, project participants (engineers, financial analysts,
marketing professionals, or quality control specialists, etc.)
work closely together under the guidance of a project
manager to complete a project.
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• Involvement of Several Departments
4–7
Projects are non-routine and have some unique
activities/elements for those organizations that have undertaken
the projects.
Projects accomplishes something that has never been done
before in the organizations.
For example, building a hybrid car, landing two mechanical
rovers on Mars, customized construction project, etc.
This requires solving previously unsolved problems and
sometimes breakthrough technology.
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• Uniqueness
4–8
-Specific time, cost, and performance requirements bind
projects.
-Projects are evaluated according to accomplishment, cost, and
time spent. These triple constraints impose a higher degree of
accountability than in other routine organizational activities.
-These three also highlight one of the primary functions of
project manager, which is balancing the trade-offs between
time, cost, and performance.
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
• Time, Cost, and Performance Requirements
4–9
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It is not regular and repetitive everyday work.
4–10
Routine, Repetitive Work
Projects
Taking class notes
Writing a term paper
Daily entering sales receipts into the
accounting ledger
Setting up a sales kiosk for a
professional accounting meeting
Responding to a supply-chain request
Developing a supply-chain
information system
Practicing scales on the piano
Writing a new piano piece
Routine manufacture of an Apple
iPod
Designing an iPod that is
approximately 2 X 4 inches,
interfaces with PC, and stores
10,000 songs
Attaching tags on a manufactured
product
Wire-tag projects for GE and
Wal-Mart
TABLE 1.1
4–11
Type of
Project
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Degree of Change
4–12
• A self-contained team works full-time on the project.
Functional Project
• Responsibility for the project lies within one functional area
of the firm. Employees from that area work on the project,
usually only part-time.
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Pure Project
Matrix Project
• A blend of pure and functional project structures – people
from different functional areas work on the project, possibly
only part-time.
4–13
– These teams operate as separate units under the leadership
of a full-time project manager (PM).
– A core group of specialists work fulltime on the project.
– The PM recruits necessary full-time personnel from within
and outside.
– The subsequent team is physically separated from the parent
organization and work full-time to complete the project.
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– At one end of the structural spectrum is the creation of
dedicated project teams.
– The interface between the parent organization and the
project team will vary.
4–14
– In other cases, firms grant the project manager
maximum freedom to get the project done as he/she
sees it. Lockheed Martin has used this approach to
develop next-generation jet airplanes.
– In a projectized organization where projects are the
dominant form of business, functional departments are
responsible for helping and support for the project
teams. Here, the organization consists of sets of quasiindependent teams working on specific projects.
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
– In some cases, the parent organization maintains a tight
rein through financial controls.
4–15
4–16
4–17
Disadvantages
• Duplication of resources
• Organizational goals and policies are
ignored
• Lack of technology transfer
• Team members have no functional area
"home"
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Advantages
• The project manager has full authority
• Team members report to one boss
• Shortened communication lines
• Team pride, motivation, and
commitment are high
4–18
–Different segments of the project are delegated to respective
functional units with each unit is responsible for completing its
segment of the project.
–Coordination is maintained through normal management
channels.
–Used when the interest of one functional area dominates the
project or one functional area has a dominant interest in the
project’s success.
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
–This approach is to simply manage projects within the existing
functional hierarchy of the organization.
–A high-ranking manager in the dominating area is given the
responsibility of coordinating the project.
4–19
4–20
Disadvantages
•Aspects of the project that are not directly related to
the functional area get short-changed
•Motivation of team members is often weak
•Needs of the client are secondary and are responded to
slowly
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Advantages
•A team member can work on several projects
•Technical expertise maintained in functional area
•Functional area is “home” after project completed
•Critical mass of specialized knowledge
4–21
 In a matrix system, there are two chains of command – one
along functional lines and the other along project lines.
 Instead of delegating segments of a project to different units
or creating an autonomous team, project participants report
simultaneously to both functional and project managers.
 This form can be applied in different ways. Some organizations
set up temporary “matrix” systems to deal with specific
projects, while in other cases “matrix” may be a permanent
fixture.
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
 It is a hybrid organizational form where a horizontal project
management structure is overlaid on the normal functional
hierarchy.
4–22
structure optimizes the use of resources.
It allows individuals work on multiple projects as well as performing
normal functional duties.
At the same time, this approach attempts to achieve greater
integration by creating and legitimizing the authority of a PM.
It provides a dual focus between functional/technical expertise and
project requirements which is missing in other two approaches
(functional and project organizations).
This dual focus can most easily be seen in the relative input of
functional managers and project managers over key project decisions.
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
-Matrix
4–23
FIGURE 3.4
4–24
Disadvantages
•Too many bosses
•Depends on project manager’s negotiating skills
•Potential for sub-optimization
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Advantages
•Better communications between functional areas
•Project manager held responsible for success
•Duplication of resources is minimized
•Functional “home” for team members
•Policies of the parent organization are followed
4–25
– A written description of the objectives to be achieved with a brief
statement of the work to be done and a proposed schedule
specifying the start and completion dates.
• Task
– A further subdivision of a project – usually shorter than several
months and performed by a single group or organization. A
subtask may be used if needed to further subdivide the project
into more meaningful pieces.
• Work Package
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• Statement of Work
– A group of activities combined to be assignable to a single
organizational unit. The package provides a description of what is
to be done, when it is to be started and completed.
4–26
– Specific events in the life of the project
– Typical milestone might be the completion of the design, the
production of a prototype, the completion of testing, etc.
• Work Breakdown Structure
– Defines the hierarchy of project tasks, subtasks, and work
packages
– Completion of one or multiple of one results in completion of
another.
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• Project Milestone
• Activities
– Pieces of work that consume time
4–27
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Overview
Details
4–28
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Overview
Details
4–29
The path taking longest time through this network of
activities is called the “critical path.”
The critical path provides a wide range of scheduling
information useful in managing a project.
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
A project is made up of a sequence of activities that
form a network representing a project.
Critical path method (CPM) helps to identify the
critical path(s) in the project networks.
4–30
Determine the required sequence
and construct a network diagram.
Determine the critical path.
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Identify each activity to be done
and estimate how long it will take.
Determine the early start/finish
and late start/finish schedule.
4–31
C(7)
B(5)
A(21)
D(2)
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F(8)
G(2)
E(5)
4–32
C(7)
21
F(8)
28
21
36
28
36
28
A(21)
0
Critical
Path 2:
ABDFG
38
36
G(2)
21
26
21
26
B(5)
21
28
D(2)
26
For the Excel template visit
www.mhhe.com/sie-chase14e
26
33
28
36
38
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
0
28
21
Critical
Path 1:
ACFG
E(5)
28
31
36
Excel: Critical
Paths
4–33
 (Late start time – Early Start Time) or (Late Finish Time – Early
Finish Time)
 Slack time indicates how much flexibility the project schedule
has.
 The higher the slack time, the higher the flexibility.
 Slack time needs to be considered during resource allocation in
the case of resource shortage.
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• Slack Time:
 Slack times are also considered to find an alternative schedule
and resource allocation to minimize project costs.
4–34
Predecessor
Time
Activity
Predecessor
Time
A
None
7
J
G,H
6
B
None
6
K
H,I
7
C
A
4
L
E,J
11
D
B
6
M
F,K
9
E
A,B
18
N
L,M
6
F
A,B
21
O
L,M
8
G
C,D
8
P
L,M
9
H
C,D
5
Q
N,O
7
I
C,D
7
R
O,P
8
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Activity
4–35
4–36
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• A network schedule that has only one critical path and
noncritical activities that enjoy significant slack would be labeled
insensitive.
• Conversely, a sensitive network would be one with more than
one critical path and/or noncritical activities with very little
slack. Under these circumstances the original critical path is
much more likely to change once work gets under way on the
project.
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
• The likelihood the original critical path(s) will change once the
project is initiated.
– Sensitivity is a function of:
 The number of critical paths
 The amount of slack across near critical activities
4–37
The assumption that all immediate preceding activities
must be 100 percent complete is too restrictive for some
situations found in practice.
Under the standard finish-to-start relationship, when an
activity has a long duration and will delay the start of an
activity immediately following it, the activity can be broken
into segments and the network drawn using a laddering
approach so the following activity can begin sooner and not
delay the work.
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• Laddering
4–38
FIGURE 6.12
4–39
– It is the minimum amount of time a dependent activity
must be delayed to begin or end. Lag is used mainly
for two reasons:
1.When activities of long duration delay the start or
finish of successor activities, the network designer
normally breaks the activity into smaller activities to
avoid the long delay of the successor activity. Use of lags
can avoid such delays and reduce network detail.
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 Lags
2.Lags can be used to constrain the start and finish of an
activity.
4–40
FIGURE 6.13
4–41
• The use of finish-to-start lags should be carefully
checked to ensure their validity.
• A simple rule to follow is that the use of finish-tostart lags must be justified and approved by someone
responsible for a large section of the project.
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• It represents typical, generic network style. However,
there are situations in which the there are situations
in which the next activity in a sequence must be
delayed even when the preceding activity is complete.
For example, removing concrete forms cannot begin
until the poured cement has cured for two time units.
4–42
FIGURE 6.14
4–43
• Figure 6.14A shows the start-to-start relationship with
zero lag, while Figure 6.14B shows the same
relationship with a lag of five time units. It is important
to note that the relationship may be used with or
without a lag.
• It is possible to find compression opportunities by
changing finish-to-start relations to start-to-start
relationships.
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• An alternative to segmenting the activities is to use a
start-to-start
relationship.
Typical
start-to-start
relationships are shown in Figure 6.14.
• A review of finish-to-start critical activities may point
out opportunities that can be revised to be parallel by
using start-to-start relationships.
4–44
Use of Lags to
Reduce Detail
FIGURE 6.15
4–45
FIGURE 6.16
4–46
Finish-to-Finish
Relationship
FIGURE 6.17
The finish of one activity depends on the finish of another
activity. For example, testing cannot be completed any earlier
than four days after the prototype is complete.
Note that this is not a finish-to-start relationship because the
testing of subcomponents can begin before the prototype is
completed, but four days of “system” testing is required after
the prototype is finished.
4–47
Start-to-Finish
Relationship
FIGURE 6.18
This relationship represents situations in which the
finish of an activity depends on the start of another
activity.
For example, system documentation cannot end until
three days after testing has started (Figure 6.18).
Here all the relevant information to complete the
system documentation is produced after the first three
days of testing.
4–48
More than one lag relationship can be attached to an
activity. These relationships are usually start-to-start and
finish-to-finish combinations tied to two activities.
For example, debug cannot begin until two time units after
coding has started.
Coding must be finished four days before debug can be
finished (Figure 6.19).
4–49
 Minimum
 Maximum
 Most likely
• This allows calculation of a probability estimate of
completion time.
• This is the distinguishing characteristic of the PERT
method.
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• When activity times vary, a single time estimate
may not be reliable.
– Instead, estimate three values
4–50
𝐸𝑇
𝑎 + 4𝑚 + 𝑏
=
6
𝜎2 =
𝑏 −𝑎
6
2
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𝑎 = 𝑚𝑖𝑛𝑖𝑚𝑢𝑚
𝑏 = 𝑚𝑎𝑥𝑖𝑚𝑢𝑚
𝑚 = 𝑚𝑜𝑠𝑡 𝑙𝑖𝑘𝑒𝑙𝑦
𝐸𝑇 = 𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑡𝑖𝑚𝑒
𝜎 2 = 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒
Excel: PERT
Calculations
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www.mhhe.com/sie-chase14e
4–51
4–52
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C(7)
0
21
F(8)
28
21
36
28
36
28
A(21)
0
38
36
G(2)
21
26
21
B(5)
21
28
26
28
D(2)
26
26
33
E(5)
28
31
36
38
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28
21
36
4–53
𝑍=
𝐷 − 𝑇𝐸
σ2𝑐𝑝
=
35 − 38
11.89
= −0.87
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• Probability of finishing in 35 weeks (or less)
4–54
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• Probability of finishing in 35 weeks (or less) is about 19.2%
4–55
• It is often referred to as “crashing” the project to reduce
overall duration.
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• A time-cost model extends the CPM model to consider the
trade-off between time required to complete an activity and
total project cost.
– Considers direct activity costs, indirect costs of project,
and activity completion times
4–56
Determine the cost per unit of time to
expedite each activity.
Compute the critical path.
Shorten the critical path at the point where
costs are lowest.
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Prepare a CPM-type network diagram.
Plot project, indirect, and total cost curves
to find the minimum-cost schedule.
4–57
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4–58
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Activity D cannot be
reduced any further
at this point
Activity A cannot be
reduced any further
at this point
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Project has reached
minimum duration
4–59
– Planned use exceeds available supply
• When resources are over-allocated, either
more resources are required or
rescheduling is necessary.
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• In addition to scheduling tasks, resources
must also be assigned to specific tasks.
• Software can be used to spot overallocation.
– Taking advantage of task slack can free
resources
4–60
• Charts provide an
easily understood
visual presentation.
• Software can be used
to create the charts.
• Gantt charts show, in
a graphic manner, the
amount of time
involved and the
sequence of activities.
Often referred to as a
bar chart.
4–61
4–62
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