Chapter 3
Project Management
3-2
OBJECTIVES
•
•
•
•
•
Definition of Project Management
Work Breakdown Structure
Project Control Charts
Structuring Projects
Critical Path Scheduling
3-3
Project Examples
Building: a ship, a satellite, an oil rig,
and a nuclear plant.
Developing: computer programs, an
advertising campaign, a new product,
a new process, and training
materials.
Implementing: new technologies and
work procedures.
3-4
Project Management
Defined
• A Project is a series of related jobs usually
directed toward some major output and
requiring a significant period of time to
perform
• Project Management are the management
activities of planning, directing, and
controlling resources (people, equipment,
material) to meet the technical, cost, and
time constraints of a project
3-5
Objectives of a Project
3-6
Objectives of a Project
The 4th
dimension:
client
satisfaction
3-7
Project Life Cycle
Project Life Cycle: changing patterns of
resource usage and level of activity
over the course of the project
3-8
Project Life Cycle
Stages of a Conventional Project:
 Slow beginning
 Buildup of size
 Peak
 Begin a decline
 Termination
3-9
Project Life Cycle
3-10
Project Life Cycle
Time distribution of project effort is
characterized by slow-rapid-slow
3-11
Project Life Cycle
Try to avoid the “90-90 rule of project
management”:
The first 90% of the project takes
90% of the time, the last 10%
takes the other 90%.
3-12
Project Life Cycle
What does this rule really mean?
3-13
Project Life Cycle
 During the life cycle cycle, project
management is accomplished through
the use of processes such as:
 Initiating, planning, executing, controlling,
and closing
 Many of these processes are iterative in
nature because the project is being
progressively elaborated
3-14
Project Life Cycle
An Alternate View*
Stage 1: Excitement – Euphoria
Stage 2: Disenchantment
Stage 3: Search for the Guilty
Stage 4: Punishment of the Innocent
Stage 5: Distinction for the Uninvolved
*Author unknown but believed to have
perished in stage 4
3-15
Defining Project Objectives
Defining Project Objectives
Why Set Project Objectives
• To provide direction for project activities
• To enable measuring results against prior
exceptions
• Resource usage (manpower, materials,
etc.)
– Schedule integrity
– Quality of work
• To determine specific goals which will
provide maximum effectiveness of project
activities
3-16
Defining Project Objectives
Requirements for Project Objectives
•
•
•
•
•
•
Achievable (time, resources, staff)
Understandable (vs. complex)
Specific (vs. general, vague statements)
Tangible (“deliverables”)
Measurable (resources, schedule, quality)
Consistent (with strategy, programs,
policies, procedures)
• Assignable (department or individual)
3-17
Defining Project Objectives
Some Problems in Setting Objectives
• Stating activities rather than deliverables
• Exceeding the scope of the defined
project
• Failing to be specific
• Omitting important deliverables
• Inconsistency with stated policies
3-18
Defining Project Objectives
Example: D.U. Singer Project
Title: Permanent Antiseptic Production
Start-Up
Objectives:
 Develop a comprehensive plan for the production of a
new, permanent antiseptic
 Complete development and testing of a manufacturing
process that:
Meets all current FDA, EPA, and OSHA
regulations as well as internal specifications
produces 95% yield of product (full
packaged) at a level of 80% of full
production goal of 10 million liters per year
3-19
Be careful of the jargon!
3-20
Another problem in objective setting …
3-21
Work Breakdown Structure
A work breakdown structure defines the
hierarchy of project tasks, subtasks, and
work packages
Level Program
1
2
Project 1
Project 2
Task 1.1
Task 1.2
3
Subtask 1.1.1
4
Work Package 1.1.1.1
Subtask 1.1.2
Work Package 1.1.1.2
3-22
Work Breakdown Structure
Program: New Product Introduction
1.0
Project 1: Engineering Development
1.1 Task 1:
Run pilot test
1.2 Task 2:
Review process costs and
efficiencies
1.3 Task 3:
Prepare Capital Equipment List
2.0
2.1
2.2
2.3
Project 2: Market Survey
Task 1:
Complete Market Survey
Task 2:
Analyze Survey Results
Task 3:
Prepare Marketing Plan
3-23
Work Breakdown Structure
3.0
Project 3: Manufacturing Start-up
3.1 Task 1:
Install and Test New Equipment
3.2 Task 2:
Establish Manufacturing
Procedures
3.3 Task 3:
Detailed Testing of Initial Output
4.0 Project 4: Sales Force Training
4.1 Task 1:
Select Sales People
4.2 Task 2:
Select Distributors
4.3 Task 3:
Train Sales Force and
Distributors
3-24
Gantt Chart
Vertical Axis:
Always Activities
or Jobs
Horizontal bars used to denote length
of time for each activity or job.
Activity 1
Activity 2
Activity 3
Activity 4
Activity 5
Activity 6
Time
Horizontal Axis: Always Time
Service Activities for A Delta Jet During a 60 Minute Layover
3-25
3-26
Network-Planning Models
• A project is made up of a sequence of
activities that form a network
representing a project
• 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
• Critical Path Method (CPM) helps to
identify the critical path(s) in the project
networks
3-27
Prerequisites for Critical Path Methodology
A project must have:
well-defined jobs or tasks whose
completion marks the end of the project;
independent jobs or tasks;
and tasks that follow a given sequence.
3-28
Types of Critical Path Methods
• CPM with a Single Time Estimate
– Used when activity times are known with certainty
– Used to determine timing estimates for the project, each
activity in the project, and slack time for activities
• CPM with Three Activity Time Estimates
– Used when activity times are uncertain
– Used to obtain the same information as the Single Time
Estimate model and probability information
• Time-Cost Models
– Used when cost trade-off information is a major
consideration in planning
– Used to determine the least cost in reducing total project
time
3-29
Steps in the CPM with Single Time Estimate
• Activity Identification
• Activity Sequencing and
Network Construction
• Determine the critical path
– From the critical path all of the
project and activity timing
information can be obtained
3-30
CPM with Single Time Estimate
Consider the following consulting project:
Activity
Assess customer's needs
Write and submit proposal
Obtain approval
Develop service vision and goals
Train employees
Quality improvement pilot groups
Write assessment report
Designation Immed. Pred. Time (Weeks)
A
None
2
B
A
1
C
B
1
D
C
2
E
C
5
F
D, E
5
G
F
1
Develop a critical path diagram and determine
the duration of the critical path and slack times
for all activities.
3-31
First draw the network
Act.
Imed. Pred. Time
A
None
2
B
A
1
C
B
1
D
C
2
E
C
5
F
D,E
5
G
F
1
A(2)
B(1)
D(2)
C(1)
F(5)
E(5)
G(1)
3-32
Find the Critical Path
• Activities on the critical path cannot be
delayed without delaying the completion
of the project
• There are two paths:
A – B – C – D – F – G: 12 weeks
A – B – C – E – F – G: 15 weeks
• Activity D can be delayed by up to 3
weeks without delaying the project
• The longest path is critical – why?
3-33
Determine early starts and early finish times
ES=4
EF=6
ES=0
EF=2
ES=2
EF=3
ES=3
EF=4
A(2)
B(1)
C(1)
Hint: Start with ES=0
and go forward in the
network from A to G.
D(2)
ES=4
EF=9
E(5)
ES=9
EF=14
ES=14
EF=15
F(5)
G(1)
3-34
Determine late starts and late
finish times
ES=0
EF=2
ES=2
EF=3
ES=3
EF=4
A(2)
B(1)
C(1)
LS=0
LF=2
LS=2
LF=3
LS=3
LF=4
Hint: Start with LF=15
or the total time of the
ES=4 project and go
EF=6 backward in the
network from G to A.
D(2)
ES=9
ES=14
EF=14 EF=15
LS=7
LF=9
G(1)
F(5)
ES=4
EF=9
LS=9
LS=14
LF=14
LF=15
E(5)
LS=4
LF=9
3-35
Critical Path & Slack
ES=4
EF=6
ES=0
EF=2
ES=2
EF=3
ES=3
EF=4
A(2)
B(1)
C(1)
LS=0
LF=2
LS=2
LF=3
LS=3
LF=4
D(2)
LS=7
LF=9
ES=4
EF=9
E(5)
LS=4
LF=9
Slack=(7-4)=(9-6)= 3 Wks
ES=9
EF=14
ES=14
EF=15
F(5)
G(1)
LS=9
LF=14
LS=14
LF=15
Duration=15 weeks
3-36
Example 2: Great Valley Hospital Project
Activity
Description
Immed. Preds.
A
Build internal components
-
B
Modify roof and floor
-
C
Construct collection stack
A
D
Pour concrete and install
frame
A, B
E
Build high-temperature
burner
C
F
Install pollution control
system
C
G
Install air pollution device
D, E
H
Inspect and test
F, G
3-37
Network for Great Valley Hospital Project
2
A
F
2
C
2
4
E
Start
3
B
4
D
3
H
5
G
3-38
Critical Path for Great Valley Hospital Project
F
A
C
E
Start
B
D
H
G
3-39
Critical Path for Great Valley Hospital Project
• Four paths in the network:
Path 1: Start – A – C – F – H: 9 weeks
Path 2: Start – A – C – E – G – H: 15 weeks
Path 3: Start – A – D – G – H: 13 weeks
Path 4: Start – B – D – G – H: 14 weeks
• Path 2 is critical
See GreatValley.mpp
3-40
Critical Path for Great Valley Hospital Project
• A, C, E, G, and H are on the critical
path and so they have 0 slack
• B is on path 4, so its slack is 15 –
14 = 1
• D is on paths 3 and 4, so its slack is
15 – Max (13,14) = 1
• F is on path 1, so its slack is 15 – 9
=6
• An activity can be delayed by its
slack and not delay the project
completion
3-41
Critical Path Analysis Setup
Latest
Start
LS
Activity
Duration
ES
Activity
Name
Earliest
Start
EF
Earliest
Finish
LF
Latest
Finish
3-42
Critical Path Analysis for Great Valley Hospital Project
Determine early starts and early finish times
A
0 H 2
0 A 2
2
Slack=0
0 HStart
0
0
0
0
BB
Start
0 H 3
4
1
3
Slack=1
C
2 H 4
2 C4
2
Slack=0
DD
3 H 7
8
4
4
Slack=1
FF
4 H 7
13
10
3
E
Slack=6
4 H
8
F
8
4
4
Slack=0 G
8 G
H 13
13
8
5
Slack=0
H
13 H 15
15
13
2
Slack=0
3-43
Great Valley Gantt Chart: Earliest Start and Finish
Great Valley General Hospital
1 2 3 4 5 6 7 8 9 10 1112 13 1415 16
A Build internal components
B Modify roof and floor
C Construct collection stack
D Pour concrete and install
frame
E Build high-temperature
burner
F Install pollution control
system
G Install air pollution device
H Inspect and test
3-44
Example 3. CPM with Three Activity Time Estimates
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28
3-45
Example 3. Expected Time Calculations
ET(A)= 3+4(6)+15
Task
A
B
C
D
E
F
G
H
I
Immediate Expected
Predecesors
Time
None
7
None
5.333
A
14
A
5
C
11
D
7
B
11
E,F
4
G,H
18
Expected Time =
6
ET(A)=42/6=7
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28
Opt. Time + 4(Most Likely Time) + Pess. Time
6
3-46
Ex. 3. Expected Time Calculations
Task
A
B
C
D
E
F
G
H
I
Immediate Expected
Predecesors
Time
None
7
None
5.333
A
14
A
5
C
11
D
7
B
11
E,F
4
G,H
18
ET(B)= 2+4(4)+14
6
ET(B)=32/6=5.333
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28
Opt. Time + 4(Most Likely Time) + Pess. Time
Expected Time =
6
3-47
Ex 3. Expected Time Calculations
Task
A
B
C
D
E
F
G
H
I
Immediate Expected
Predecesors
Time
None
7
None
5.333
A
14
A
5
C
11
D
7
B
11
E,F
4
G,H
18
ET(C)= 6+4(12)+30
6
ET(C)=84/6=14
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28
Opt. Time + 4(Most Likely Time) + Pess. Time
Expected Time =
6
3-48
Example 3. Network
Duration = 54 Days
C(14)
E(11)
H(4)
A(7)
D(5)
F(7)
I(18)
B
(5.333)
G(11)
3-49
Example 3. Probability Exercise
What is the probability of finishing this project in
less than 53 days?
p(t < D)
D=53
t
TE = 54
Z =
D - TE
2

 cp
3-50
A ctivity variance, 
Task
A
B
C
D
E
F
G
H
I
2
Pessim . - O ptim . 2
= (
)
6
Optimistic Most Likely Pessimistic Variance
3
6
15
4
2
4
14
6
12
30
16
2
5
8
5
11
17
4
3
6
15
3
9
27
1
4
7
1
4
19
28
16
(Sum the variance along the critical path.)
2

 = 41
3-51
p(t < D)
t
TE = 54
D=53
Z =
D - TE

2
cp
53 - 54
=
= -.156
41
p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156)
There is a 43.8% probability that this project will be
completed in less than 53 weeks.
3-52
Ex 3. Additional Probability Exercise
What is the probability that
the project duration will
exceed 56 weeks?
3-53
Example 3. Additional Exercise Solution
p(t < D)
TE = 54
Z =
D - TE
2

 cp
t
D=56
56 - 54
=
= .312
41
p(Z > .312) = .378, or 37.8 % (1-NORMSDIST(.312))
3-54
Time-Cost Models
• In construction, incentives for
completing project early
• In new product development,
revenue stream starts earlier if
project is launched earlier
• Time-Cost Models:
– To accelerate the completion of a
project, expedite or “crash” the critical
path project activity that has the
cheapest cost per unit time to shorten
its duration
3-55
Steps in Time-Cost Analysis
• Using normal activity times, find the critical path
• Compute the crash cost per time period:
Crash cost/period = (Crash cost - Normal cost)/
(Normal time - Crash time)
• If there is only one critical path, select the activity on
the critical path that (a) can still be crashed, and (b)
has the smallest crash cost per period
• If there are multiple critical paths, select the cheapest
crash cost combination of critical path activities that
can still be crashed that will reduce ALL critical paths
by one period
• Update all activity times and repeat process if further
reduction in critical path time is desired
3-56
Example 4. Great Valley Hospital Project with Crashing
Act.
A
B
C
D
E
F
G
H
NT
2
3
2
4
4
3
5
2
CT NC
1 22,000
1 30,000
1 26,000
3 48,000
2 56,000
2 30,000
2 80,000
1 16,000
CC
22,750
34,000
27,000
49,000
58,000
30,500
84,500
19,000
CC/WK CP?
750
Y
2000
N
1,000
Y
1,000
N
1,000
Y
500
N
1,500 Y
3,000 Y
3-57
Example 4. Great Valley Hospital Project Crashing Analysis
• Select the activity with smallest crash
cost per week that is on the critical
path – activity A at a cost of $750
• Start – B – D – G – H is also critical
(14 wks)
• Crash G by 1 week at a cost of $1,500
to reduce the project by an additional
week (vs. crashing C and D at a
combined cost of $2,000)
3-58
Question Bowl
Which of the following are
examples of Graphic Project
Charts?
a. Gantt
b. Bar
c. Milestone
d. All of the above
e. None of the above
Answer: d. All of the above
3-59
Question Bowl
Which of the following are one of the
three organizational structures of
projects?
a. Pure
b. Functional
c. Matrix
d. All of the above
e. None of the above
Answer: d. All of the above
3-60
Question Bowl
A project starts with a written description of the
objectives to be achieved, with a brief
statement of the work to be done and a
proposed schedule all contained in which of
the following?
a.
SOW
b. WBS
c.
Early Start Schedule
d. Late Start Schedule
e.
None of the above
Answer: a. SOW (or Statement of Work)
3-61
Question Bowl
For some activities in a project there may be
some leeway from when an activity can start
and when it must finish. What is this period
of time called when using the Critical Path
Method?
a. Early start time
b. Late start time
c. Slack time
d. All of the above
e. None of the above
Answer: c. Slack time
3-62
Question Bowl
How much “slack time” is permitted in the “critical
path” activity times?
a. Only one unit of time per activity
b. No slack time is permitted
c. As much as the maximum activity time in the
network
d. As much as is necessary to add up to the total
time of the project
e. None of the above
Answer: b. No slack time is permitted (All
critical path activities must have zero slack
time, otherwise they would not be critical to
the project completion time.)
3-63
Question Bowl
When looking at the Time-Cost Trade Offs in the
Minimum-Cost Scheduling time-cost model,
we seek to reduce the total time of a project
by doing what to the least-cost activity
choices?
Answer: a. Crashing
a. Crashing them
them (We “crash” the
b. Adding slack time
c. Subtracting slack time least-cost activity times
to seek a reduced total
d. Adding project time
time for the entire
e. None of the above
project and we do it
step-wise as
inexpensively as
possible.)
3-64
End of Chapter 3