Operations
Management
Project Management
Chapter 3 - Heizer
3-1
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Why a separate topic ?
 If you look back to the product-process matrix,
there is a focus on volume
- as volume increases, we become more
standardized and efficient
- as volume decreases, we have more
customization
 Project-based work is becoming increasingly
prevalent for market-driven reasons
- Growing project complexity
- Collapsing product/service life cycles
3-2
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Examples of Projects
 Building construction
Software development
 Staging a play
3-3
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Characteristics of Projects
 Single unit
 Relatively low frequency
 Defined starting points and ending points
 Defined outcomes / goals
 Complex interrelated tasks, often transcending
functional boundaries
 Require special management tools
3-4
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Project Management Activities
Planning




Scheduling
Objectives
Resources
Work breakdown structure
Organization



Project
activities
Start & end
times
Network
Controlling

Monitor, compare,
revise, action
3-5
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Project Planning, Scheduling & Controlling
3-6
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
WBS – Work Breakdown Structure
A statement of all work that has to be completed. A
list of all activities or tasks that constitute the project.
Project
Major tasks in the project
Subtasks in the major tasks
Activities (or work packages) to be completed
3-7
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Project Scheduling
 Identifying precedence relationships
 Sequencing activities
 Determining activity times & costs
 Estimating material & worker
requirements
 Determining critical activities
3-8
© 1995 Corel Corp.
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Project Management Techniques
 Gantt chart
 Critical Path Method (CPM)
 Program Evaluation & Review
Technique (PERT)
© 1984-1994 T/Maker Co.
3-9
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Gantt Chart
Activity
Time Period
J
F
M
A
M
J
J
Design
Build
Test
3-10
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
PERT / CPM
Network planning methods that generate:
 Relationship between activities
 Project duration
 Critical path
 Slack for non – critical activities
 Crashing (cost / time trade-offs)
 Resource usage
3-11
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
St. Paul’s Hospital
Activity
A
B
C
D
E
F
G
H
I
J
K
Immediate
Predecessor(s)
Description
Select administrative and medical staff.
Select site and do site survey.
Select equipment.
Prepare final construction plans and layout.
Bring utilities to the site.
Interview applicants and fill positions in nursing,
support staff, maintenance, and security.
Purchase and take delivery of equipment.
Construct the hospital.
Develop an information system.
Install the equipment.
Train nurses and support staff.
3-12
—
—
A
B
B
A
C
D
A
E,G,H
F,I,J
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
St. Paul’s Hospital
Activity
A
B
C
D
E
F
G
H
I
J
K
Immediate
Predecessor(s)
AON Network
Description
I
Select administrative and medical staff.
Select site and do site survey.
A
F
K
Select equipment.
Prepare final construction plans and layout.
Bring utilities to the site.
Start
Finish
C fill positions
G
Interview
applicants and
in nursing,
support staff, maintenance, and security.
Purchase and take delivery of equipment.
D
B hospital.
H
J
Construct the
Develop an information system.
Install the equipment.
E staff.
Train nurses and support
3-13
—
—
A
B
B
A
C
D
A
E,G,H
F,I,J
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
St. Paul’s Hospital
Immediate
Predecessor(s)
Completion Time
I
Activity
Description
15
A
B
C
D
E
F
G
H
I
J
K
Select administrative and medical staff.
A do site survey.
F
K
Select site and
12
10
9
Select equipment.
Prepare final construction plans and layout.
C
G
BringStart
utilities to the site.
Finish
10
35
Interview applicants and fill positions in nursing,
support staff, maintenance, and security.
B
D
H
J
Purchase and
take
delivery
of
equipment.
9
10
40
4
Construct the hospital.
Develop an information system.
E
Install the equipment. 24
Train nurses and support staff.
3-14
—
—
A
B
B
A
C
D
A
E,G,H
F,I,J
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Path
St. Paul’s Hospital
Expected Time (wks)
A-I-K
36
A-F-K
31 Critical
Immediate
Completion Time
A-C-G-J-K
70 Path
I
Activity
Description
Predecessor(s)
B-D-H-J-K
72
15
B-E-J-K
46 —
A
Select administrative and medical
staff.
B
Select site
—
A and do Fsite survey.
K
9
C
Select 12
equipment.10
A
D
Prepare final construction plans and layout.
B
E
Bring utilities to the
site. G
B
C
Start
Finish
F
Interview
applicants
positions in nursing,
10 and fill 35
support staff, maintenance, and security.
A
G
Purchase
C
B and takeDdelivery of
H equipment.
J
9 the hospital.
10
40
4
H
Construct
D
I
Develop an information system.
A
J
Install the equipment.
E,G,H
E
K
Train nurses and 24
support staff.
F,I,J
3-15
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Critical Path
 The longest path in the network
 Defines the shortest time project can be completed
 Critical path activity delay
project delay
3-16
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Earliest Start and Earliest Finish
 Begin at starting event and work forward
 ES is earliest start
 ES = 0 for starting activities
 ES = Maximum EF of all
predecessors for
non-starting activities
ES
Activity
Name
EF
 EF is earliest finish
 EF = ES + Activity time
LS
3-17
Activity
Duration
LF
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Earliest Start / Earliest Finish
I
15
A
F
K
12
10
9
C
G
10
35
B
D
H
J
9
10
40
4
Start
Finish
E
24
3-18
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Earliest Start / Earliest Finish
12 I 27
Earliest start time
Start
Earliest finish time
15
0 A 12
12 F 22
63 K 72
12
10
9
12 C 22
22 G 57
10
35
0 B 9
9 D 19
19 H 59
59 J 63
9
10
40
4
Critical
path
Finish
9 E 33
24
3-19
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Latest Start and Latest Finish
 Begin at ending event and work backward
 LF is latest finish
 LF = Maximum EF for
ending activities
 LF = Minimum LS of all
successors for
non-ending activities
 LS is latest start
ES
LS
 LS = LF – Activity time
3-20
Activity
Name
Activity
Duration
EF
LF
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Latest Start / Latest Finish
Latest start time
0
2
Start
A 12
12
14
Critical
path
0
0
B 9
9
9
12 I 27
48
63
15
Latest finish time
12 F 22
53
63
63 K 72
63
72
10
9
12 C 22
14
24
22 G 57
24
59
9 D 19
9
19
19 H 59
19
59
10
Finish
35
40
10
9 E 33
35
59
24
3-21
59 J 63
59
63
4
What do you
notice about
ES/LS & EF/LF?
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Activity Slack Analysis
Slack
= LS
– ES
Latest
start
time
or A
0
2
12
14
Slack = LF12– EF
12 I 27
48
63
15
Latest finish time
12 F 22
53
63
63 K 72
63
72
10
9
12 C 22
14
24
22 G 57
24
59
9 D 19
9
19
19 H 59
19
59
Start
Slack
– 63 = 010
K = 63Critical
Finish
35
path
or
0
0
B 9
SlackK = 72 9– 972 = 010
40
59 J 63
59
63
4
9 E 33
35
59
24
3-22
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Activity Slack Analysis
LS
12 I 27
48Slack
63
0
2
A012 0
1214 14
129
9
9 35
12 53
22 24
Critical
19 19
path
12 48
B 9 59
59
63 9 63
2
0
12 F 22
53 2 63
10
0
26
41
12 C 22
14 2 24
10
0
36
0 19
9 D
9 0 19
Node Duration ES
Latest
start time
A
B
C
D
E
F
Start
G
H
I
J
K
12
9
10
10
24
10
35
40
15
4
6
0
2
0
0
9
15
Latest finish time
63 K 72
63
72
9
22 G 57
24
59
Finish
35
19 H 59
19
59
40
10
59 J 63
59
63
4
Activity slack = maximum delay time
9 E 33
35
59
Critical
24 path activities have zero slack
3-23
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Activity Slack
How much would we like to reduce
the time for activity B?
5
A
Start
B 25
5 20 25
D
25
35
25 10 35
0
5
0 5 5
Finish
C
5
20
10 15 25
3-24
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Activity Times & Project Times


 3 activity time estimates
 Optimistic times (a)
 Most-likely time (m)
 Pessimistic time (b)
 Follow beta distribution
 Expected time: t = (a + 4m + b) / 6
 Variance of times: v = (b - a)2 / 6
 Expected project time:
T = sum of critical path activity times, t
 Project variance:
V = sum of critical path activity variances
3-25
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Completion Time for Noncritical Activities
 Variability of times for activities on non-critical
paths must be considered when determining
the probability of finishing in a specified time.
 Variation in non-critical activity may cause
change in critical path.
3-26
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Cost / Time Trade-offs
Most activities can be done faster if you
pay more money
 Work overtime / hire more people /
rent extra equipment / incentive contracts
 PERT / CPM have the ability to crash
a schedule – to shorten activity time in a network
to reduce project completion time.
3-27
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Cost / Time Relationship
Direct cost (dollars)
8000 —
Crash cost
7000 —
Activity B
6000 —
5000 —
Normal cost
4000 —
3000 —
0—
|
5
Crash
time
|
6
|
7
8
3-28
|
9
|
10
|
11
Normal
time
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Project Control Reports
 Performance vs. schedule
 Expected time to project completion
 Cost vs. budget
 Detailed cost breakdowns for each task
and organization
 Expected total project cost
 Resource reports
 Corrective action / contingency reports
3-29
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Summary
 Project management requires special tools
PERT / CPM – Network planning methods that generate
relationship between activities, project duration,
critical path, slack for non-critical activities, crashing
(cost / time trade-offs), and resource usage
 Project-based work is becoming increasingly prevalent for
market-driven reasons
- Growing project complexity
- Collapsing product/service life cycles
 People with these skills are in demand
 We have only scratched the surface – if you are interested,
take the PM elective BA 462
3-30
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458