F O U R T H E D I T I O N

Project Management

© The McGraw-Hill Companies, Inc., 2003

supplement 3

DAVIS

AQUILANO

CHASE

PowerPointPresentation

byCharlieCook

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–2

Supplement ObjectivesSupplement ObjectivesSupplement ObjectivesSupplement Objectives

• Recognize 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–3

Definition of Project ManagementDefinition of Project ManagementDefinition of Project ManagementDefinition of Project Management

• Project–Series of related jobs or tasks focused on the

completion of an overall objective.

• Project Management–Planning, directing, and controlling resources to

meet the technical, cost, and time constraints of the project.

• Program–Synonym for a project, although it also can

consist of several interrelated projects.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–4

Project Management: Key TermsProject Management: Key TermsProject Management: Key TermsProject 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–5

Work Breakdown StructureWork Breakdown StructureWork Breakdown StructureWork 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

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–6

Exhibit S3.1Exhibit S3.1

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–7

Key Factors in a Breakdown Key Factors in a Breakdown StructureStructure

Key Factors in a Breakdown Key Factors in a Breakdown StructureStructure

• Allow the activities to be worked on independently.

• Make them of manageable size.• Give authority to carry out the program.• Monitor and measure the program.• Provide the required measures.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–8

Organizational Considerations in Organizational Considerations in Project ManagementProject Management

Organizational Considerations in Organizational Considerations in Project ManagementProject Management

• Role of the Project Manager–Using social and technical skills to manage

across traditional functional lines to create a collaborative culture.

• High-Performance Project Teams–Creating a successful team requires

consideration of:• Task-related variables

• People-related variables

• Leadership variables

• Organization variables

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–9

Organizational Considerations in Organizational Considerations in Project Management (cont’d)Project Management (cont’d)

Organizational Considerations in Organizational Considerations in Project Management (cont’d)Project Management (cont’d)

• Barriers to High Team Performance:–Different points of view–Role conflicts–Power struggles

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–10

Project ControlProject ControlProject ControlProject 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–11

Gantt ChartGantt ChartGantt ChartGantt Chart

Exhibit S3.2AExhibit S3.2A

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–12

Total Program Cost BreakdownTotal Program Cost BreakdownTotal Program Cost BreakdownTotal Program Cost Breakdown

Exhibit S3.2BExhibit S3.2B

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–13

Divisional Breakdown of Costs and Labor Divisional Breakdown of Costs and Labor HoursHours

Divisional Breakdown of Costs and Labor Divisional Breakdown of Costs and Labor HoursHours

Exhibit S3.2CExhibit S3.2C

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–14

Cost and Cost and Performance Performance

Tracking Tracking ScheduleSchedule

Cost and Cost and Performance Performance

Tracking Tracking ScheduleSchedule

Exhibit S3.2DExhibit S3.2D

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–15

Bar/Milestone ChartBar/Milestone ChartBar/Milestone ChartBar/Milestone Chart

Exhibit S3.2EExhibit S3.2E

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–16

Critical Path SchedulingCritical Path SchedulingCritical Path SchedulingCritical 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).

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–17

Critical Path SchedulingCritical Path SchedulingCritical Path SchedulingCritical Path Scheduling

• Project Characteristics–Well-defined jobs or tasks indicating completion

of the project.–Tasks must be independent of each other.–Job or tasks are ordered such that each must

follow a particular or given sequence.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–18

CPM Key TermsCPM Key TermsCPM Key TermsCPM 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–19

CPM with a Single Time EstimateCPM with a Single Time EstimateCPM with a Single Time EstimateCPM 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–20

CPM Network for Computer Design ProjectCPM Network for Computer Design ProjectCPM Network for Computer Design ProjectCPM Network for Computer Design Project

Exhibit S3.3Exhibit S3.3

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–21

CPM Key Terms (cont’d)CPM Key Terms (cont’d)CPM Key Terms (cont’d)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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–22

CPM Network for Computer Design ProjectCPM Network for Computer Design ProjectCPM Network for Computer Design ProjectCPM Network for Computer Design Project

Exhibit S3.4Exhibit S3.4

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–23

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

Step 1: Identify activities.

Step 2: Sequence activities and construct network.

Step 3: Determine the three time estimates foreach activity.a = optimistic timem = most likely timeb = pessimistic time

Step 4: Calculate the expected time (ET) for each activity.

6b 4m a ET

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–24

Typical Beta CurvesTypical Beta CurvesTypical Beta CurvesTypical Beta Curves

Exhibit S3.5Exhibit S3.5

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–25

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

Step 5: Calculate the variance (σ2) for each activity.

22

6

ab

Exhibit S3.6Exhibit S3.6

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–26

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

Step 6: Identify all of the paths in the network and their estimated completion times and variances.

Exhibit S3.7Exhibit S3.7

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–27

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

CPM with Three Activity Time CPM with Three Activity Time EstimatesEstimates

Step 7: Determine the probability of completing the project by a certain date.

p

pETDZ

D = Desired completion date for the project

ETp = Expected completion time for the path

σp = Standard deviation for the path

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–28

Probability of Each Path Being Probability of Each Path Being Completed in 39 Weeks or LessCompleted in 39 Weeks or LessProbability of Each Path Being Probability of Each Path Being Completed in 39 Weeks or LessCompleted in 39 Weeks or Less

Exhibit S3.8aExhibit S3.8a

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–29

Probability of Each Path Being Completed Probability of Each Path Being Completed in 39 Weeks or Less (cont’d)in 39 Weeks or Less (cont’d)

Probability of Each Path Being Completed Probability of Each Path Being Completed in 39 Weeks or Less (cont’d)in 39 Weeks or Less (cont’d)

Exhibit S3.8bExhibit S3.8b

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–30

Path Values and Probabilities of Path Values and Probabilities of Completing Each Path in 39 Weeks or Completing Each Path in 39 Weeks or

LessLess

Path Values and Probabilities of Path Values and Probabilities of Completing Each Path in 39 Weeks or Completing Each Path in 39 Weeks or

LessLess

Exhibit S3.9Exhibit S3.9

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–31

Time-Cost Trade-off ModelsTime-Cost Trade-off ModelsTime-Cost Trade-off ModelsTime-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.

• Crash Costs–The additional costs of an activity when time to

complete it is shortened.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–32

Minimum-Cost SchedulingMinimum-Cost SchedulingMinimum-Cost SchedulingMinimum-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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–33

Exhibit S3.10Exhibit S3.10

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–34

Calculation of Cost Per Day to Expedite Calculation of Cost Per Day to Expedite Each ActivityEach Activity

Calculation of Cost Per Day to Expedite Calculation of Cost Per Day to Expedite Each ActivityEach Activity

Exhibit S3.11Exhibit S3.11

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–35

Reducing Project Completion Time Reducing Project Completion Time One Day at a TimeOne Day at a Time

Reducing Project Completion Time Reducing Project Completion Time One Day at a TimeOne Day at a Time

Exhibit S3.12Exhibit S3.12

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 S3–36

Plot of Costs and Minimum Cost SchedulePlot of Costs and Minimum Cost SchedulePlot of Costs and Minimum Cost SchedulePlot of Costs and Minimum Cost Schedule

Exhibit S3.13Exhibit S3.13