Mark M. Davis Janelle Heineke OPERATIONS MANAGEMENT INTEGRATING MANUFACTURING AND SERVICES FIFTH EDITION PowerPoint Presentation by Charlie Cook, The University of West Alabama Copyright ©2005, The McGraw-Hill Companies, Inc. CHAPTER 7 Project Management PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2005 The McGraw-Hill Companies. All rights reserved. CHAPTER OBJECTIVES • Demonstrate that project management involves both people skills to coordinate and motivate individuals from a range of disciplines and technical skills to properly plan and schedule a project. • Explain the role of the project manager in organizing and coordinating all activities performed in a project. • Introduce critical path scheduling as a tool for identifying activities that require immediate attention. • Identify the time–cost trade-offs involved in expediting the completion of a project. • Discuss some of the criticisms often associated with project management techniques. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–3 Definition of Project Management • Project –Series of related jobs or tasks focused on the completion of an overall objective. • Statement of Work (SOW) – Objectives, tasks, schedule, performance measures • Project Management –Planning, directing, and controlling resources to meet the technical, cost, and time constraints of the project. • Program –Synonym for a large project, although it also can consist of several interrelated projects. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–4 Project Management: Key Terms • Task (Activity) –A subdivision of a project perform by one group or organization. • Subtask –Used to break a project into more meaningful pieces. • Work Package –A group of activities combined to be assignable to a single organizational unit. • Milestones –Specific events to be reached at points in time. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–5 Work Breakdown Structure • Work Breakdown Structure –Method by which a project is divided into tasks and subtasks. Level 1 Program 2 Project 3 Task 4 Subtask 5 Work Package Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–6 Different Formats for Presenting a Work Breakdown Structure Exhibit 7.1 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–7 Part of a Work Breakdown Structure for Opening a New Restaurant Exhibit 7.2 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–8 A Good Work Breakdown Structure: • Allows the activities to be worked on independently. • Makes activities manageable in size. • Gives authority to carry out the program. • Monitors and measure the program. • Provides the required resources. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–9 Organizational Considerations in Project Management • Role of the Project Manager – Using social and technical skills to manage across traditional functional lines to create a collaborative work environment. • Launching and Implementing the Project Plan – Developmental stages of teamwork: • • • • • Forming Storming Norming Performing Adjourning Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–10 Organizational Considerations in Project Management (cont’d) • High-Performance Project Teams – Creating a successful team requires consideration of: • • • • Task-related variables People-related variables Leadership variables Organization variables • Barriers to High Team Performance: – Different points of view – Role conflicts – Power struggles Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–11 Project Control • Gantt Chart –Graphical technique that shows the amount of time required for each activity and the sequence in which the activities are to be performed. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–12 A Sample of Graphic Project Reports: Gantt Chart Exhibit 7.3A Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–13 A Sample of Graphic Project Reports (cont’d): Total Program Cost Breakdown Exhibit 7.3B Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–14 A Sample of Graphic Project Reports (cont’d): Divisional Breakdown of Costs and Labor Hours Exhibit 7.3C Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–15 A Sample of Graphic Project Reports (cont’d): Cost and Performance Tracking Schedule Exhibit 7.3D Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–16 A Sample of Graphic Project Reports (cont’d): Bar/Milestone Chart Exhibit 7.3e Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–17 Critical Path Scheduling • PERT (Program Evaluation and Review Technique) –The technique developed by the U.S. Navy for planning the Polaris missile project. • CPM (Critical Path Method) –Technique developed by J. E. Kelly and M. R.Walker to schedule preventative maintenance shutdowns of chemical processing plants. • Identifies the longest time-consuming path through a network of tasks required to complete a project (i.e., the shortest time in which the project can be completed). Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–18 Critical Path Scheduling Requirements • Project Characteristics –It must have well-defined jobs or tasks whose completion marks the end of the project. –The jobs or tasks are independent; they may be started, stopped, and conducted separately within a given sequence. –The jobs or tasks are ordered; certain ones must follow others in a given sequence. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–19 CPM with a Single Time Estimate Step 1: Identify all project activities. Step 2: Sequence activities and construct network. Step 3: Determine the critical path. Step 4: Determine slack times. Step 4.1: Find the EF and ES for each activity. Step 4.2: Find the LS and LF for each activity. Step 4.3: Determined the total slack time for each activity. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–20 CPM Network for Computer Design Project Exhibit 7.4 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–21 CPM Key Terms • Slack Time – The amount of time the starting of an activity can be delayed without affecting the earliest completion date of the overall project. • Early start (ES): the earliest possible time an activity can begin. • Early finish time (EF): the early start time plus the time need to complete the activity. • Late finish time (LF): the latest time an activity can end without delaying the project. • Late start time (LS): the late finish time minus the time needed to complete the activity. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–22 CPM Key Terms (cont’d) • Early Start Schedule –The earliest time that each activity in the project can be started. • Late Start Schedule –The latest start time that each activity can be started without affecting the overall completion time. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–23 CPM Network for Computer Design Project Exhibit 7.5 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–24 CPM with Three Activity Time Estimates Step 1: Identify activities. Step 2: Sequence activities and construct network. Step 3: Determine the three time estimates for each activity. a = optimistic time m = most likely time b = pessimistic time Step 4: Calculate the expected time (ET) for each activity. + 4m + b a ET = 6 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–25 Typical Beta Curves Exhibit 7.6 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–26 Activity Expected Times and Variances Step 5: Calculate the variance (σ2) for each activity. Exhibit 7.7 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–27 Path Estimated Completion Times and Variances Step 6: Identify all of the paths in the network and their estimated completion times and variances. Exhibit 7.8 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–28 CPM with Three Activity Time Estimates Step 7: Determine the probability of completing the project by a certain date. Z= D ET p p D = Desired completion date for the project ETp = Expected completion time for the path σp = Standard deviation for the path Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–29 Probability of Each Path Being Completed in 39 Weeks or Less Exhibit 7.9 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–30 Probability of Each Path Being Completed in 39 Weeks or Less (cont’d) Exhibit 7.9 (cont’d) Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–31 Path Z-Values and Probabilities of Completing Each Path in 39 Weeks or Less Exhibit 7.10 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–32 Time-Cost Trade-off Models • Time-Cost Trade-off Model –A model that develops the relationship between direct project costs, indirect costs, and time to complete the project by minimizing the sum of direct and indirect costs. • Direct costs: costs (e.g., labor and materials incurred solely for project activities • Indirect costs: overhead, facilities, and resource opportunity costs associated with sustaining the project. • Crash Costs –The additional costs of an activity when time to complete it is shortened. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–33 Minimum-Cost Scheduling Step 1: Prepare CPM-type network diagram. a. Normal cost (NC) b. Normal time (NT) c. Crash time (CT) d. Crash Cost (CC) Step 2: Determine the cost per unit of time to expedite (or crash) each activity. Step 3: Compute the critical path. Step 4: Shorten the critical path at the least cost. Step 5: Plot project direct, indirect, and total-cost curves and find the minimum-cost schedule. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–34 Example of Time–Cost Trade-Off Procedure Exhibit 7.11 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–35 Calculation of Cost per Day to Expedite Each Activity Exhibit 7.12 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–36 Reducing the Project Completion Time One Day at a Time *To reduce both critical paths by one day, reduce either A alone, or B and C together at the same time (since either B or C by itself modifies the critical path without shortening it). †B & C must be crashed together to reduce both critical paths by one day. Exhibit 7.13 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–37 Plot of Costs and Minimum Cost Schedule Exhibit 7.14 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–38 Criticisms of PERT and CPM • Assumption: Activities are entities having a clear beginning and ending point for each activity. – Criticism: Projects change over time such that a beginning network may be highly inaccurate later on. • Assumption: Activity sequence relationships can be specified and networked. – Criticism: The sequence of relationships cannot always be specified beforehand. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–39 Criticisms of PERT and CPM • Assumption: Project control should focus on the critical path. – Criticism: It is not necessarily true that the longest time-consuming path (or the path in which each of the activities has zero slack) ultimately determines project completion time. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–40 Project Management Related Issues • Closing Out and Evaluating the Project – Reasons given for not evaluating projects • • • • “It’s time to move on.” “We know we made mistakes; no point in dwelling on them.” “The team has changed.” “It’s costly to meet about something that’s already done.” • Project Life-Cycle Compression – Fast-tracking: overlapping phases or activities • Relating Projects to Repetitive Processes – Prior projects are useful sources of information and guidance for repeated projects. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 7–41