chapter 2 project management an overview
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Chapter 2 Project managementTRANSCRIPT
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Project Management And Appraisal
Sitangshu Khatua, Associate Dean,
Jyotirmoy School of Business, Kolkata
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Chapter 2 Project Management – an Overview
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• Explain the phases of project management and explain network diagrams AOA and AON as part of project scheduling process
• Understand the concept of WBS and OBS, Gantt chart, bar bhart, line of balance (LOB), etc.
• Understand different methods of project scheduling and networking like the critical path method (CPM) and program evaluation and review techniques(PERT)
• Assimilate the concept of cost crashing of project network
• Describe how to analyse project scheduling with constrained resources
• Understand the concept of critical chain and buffer management approach
• Understand the graphical evaluation and review techniques (GERT)
• Understand project management software such as Microsoft Project 2010
Learning Objectives
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Phases of Project Management
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Project Scheduling Process
Project scheduling is the basic concept of project (activity) network, the development of work breakdown and organizational breakdown structures and the network representation of activities and events.
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The Activity – on – Arrow or Activity – on – Arc (AOA) representation which uses the set of arcs or arrows A to represent the activities and the set of nodes N to represent events
The Activity – on – Node (AON) representation which uses the set of nodes N to denote the activities or events and the set of set arc or arrows A to represent the precedence relations.
Project Management and Appraisal by Sitangshu Khatua
Activity Networks
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Example – AOA Network
Following activities with their immediate predecessors are given, draw the corresponding AOA network diagram.
Activity Immediate PredecessorP QR P S PT PU Q,RV R, S, TW UX V
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Activities R, S, T all are having immediate predecessor of P. then the above relationship can be depicted as follows.
Solution
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Activities U and V have the common activity R. Therefore, the common activity R would be followed by two dummy activities approaching in opposite direction. The exact relationship is shown in the figure
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Draw the corresponding AON diagram for the following Relationship:
Example – AON Network
Activity Immediate Predecessor
a
b
c a
d a
e b,c
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s – start , f- finish
AON Network Diagram
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AOA vs AON Network
The difference between AOA and AON network
AOA Network AON Network
In an AOA network diagram the activity is denoted by an arrow
In an AON network diagram each activity is represented by a node
Nodes are denoted by circles. Nodes are denoted by arrow.
Each event is numbered There is no need to number the events.
AOA is more popular and widely used.
It has a better visual aid because of its closer resemblance to the Bar chart.
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Work Breakdown Structure (WBS)
The WBS defines the various project sub-activities in
relation to the project result.
The WBS creates a framework for project control and
provides the basis for insight in the time and cost status
of a project through various management tools.
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Project Management and Appraisal by Sitangshu Khatua
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Organization Breakdown Structure (OBS)
Organization Breakdown Structure (OBS) shows the break-up of organizational units that would work for execution of the project. OBS is actually the Organization Chart for a Project. It links the responsibilities of the organizational units to the various WBS levels. A particular unit in the OBS is assigned a specific task corresponding to a particular element in the WBS level.
Project Management and Appraisal by Sitangshu Khatua
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Project Management and Appraisal by Sitangshu Khatua
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Gantt chart/Bar Chart
It is a means of displaying simple activities or events plotted against time. Gantt charts are most commonly used for exhibiting program progress or defining specific work required to accomplish an objective
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Bar Chart
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Activity Number Activity Name I Tender notificationII Vender selectionIII Agreement signed IV Inspection at sightV Procurement VI Receiving of
materials VII Material
specificationsVIII Operation
SchedulingIX Start production
List of Activities
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It is simple to understand and easy to change.
It is the simplest and least complex means of portraying
progress
It can easily be expanded to identify specific elements
that may be either behind or ahead of schedule
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Advantages of the Gantt Chart
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Disadvantages of Gantt Chart
It doesn’t show the interdependencies of the activities, and therefore do not represent a network of activities. For example, whether the procurement activity (V) in the example require that the agreement be signed (III) before procurement can begin?
It cannot show the result of an early or a late start in activities. How will a slippage of the operation scheduling activity (VIII) in the example affect the completion date of the program?
It does not show the uncertainty involved in performing the activity and, therefore does not readily admit itself to sensitivity analysis. For instance, the longest time or shortest time or the average time that an activity might take
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Critical Path Method (CPM)
It is the scheduled technique which is used to plan, schedule and control a project consisting of number of inter-related activities. These techniques provide a framework which defines the job that is to be formed, integrates them in a logical sequence and provides a system of control over the progress of the plan.
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1. The project to be planned by network technique should consist of clearly specific job called Activities. Activities are classified as:
a.Critical activities
b.Non-Critical Activities
c.Dummy Activities
Features of CPM or Other Network Analysis Project
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2. These activities must have a definite start and finish. The start and finish of an activity is called event.
A = Activity, 1 = Tail event, 2 = Head event
3. Event must occur in a definite pattern and must be performed in a technological sequence
4. Network Diagram
5. In a sequential project work operations can be pre-operations which precede the operation under consideration, post-operations which succeed the operation under consideration and concurrent operations which can be started simultaneously
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Features of CPM or Other Network Analysis Project
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6. Various times used in CPM:
a.Earliest Start Time (EST):
b.Earliest Finish Time (EFT):
EFT = EST + duration of activity
c. Latest Start Time (LST):
LST = LFT – duration of the activity.
d. Latest Finish Time (LFT):
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Features of CPM or Other Network Analysis Project
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7. Float or Slack = time available for completion of the activity –
time necessary to complete the same.
Activity Float
Safety Float
Free Float
Total Float
8. Critical Path
9. Forward Pass & Backward Pass
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Features of CPM or Other Network Analysis Project
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A programmable algorithm for basic scheduling computation is given where:
D ij estimate of the mean duration time for activity i-j
E i earliest occurrence time for event i
L i latest allowable occurrence time for event i
ES ij earliest start time for activity i-j
EF ij earliest finish time for activity i-j
LS ij latest allowable start time for activity i-j
LF ij latest allowable finish time for activity i-j
S ij total slack (or float time) for activity i-j
FS ij free slack (or float time) for activity i-j
T s scheduled time for the completion of project or the occurrence of certain key
events in the project
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Basic scheduling Computation
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Ej = maxi (Ei + Dij) 2 < J < t …………. (2.1) Et = (expected) project duration, andLi = Et or Ts, the scheduled project completion time. Then, Li = minj (Li - Dij) 1 < i < t -1 …………… (2.2) Earliest and Latest Activity Start and Finish Times and Slack
ESij = Ei …………….. (2.3)EFij = Ei + Dij …………….. (2.4)LFij = Lj …………….. (2.5)LSij = Lj - Dij …………….. (2.6)Sij = Lj - EFij …………….. (2.7)
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Earliest and Latest event times
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An Example to Show the Critical PathActivity Description Duration in
daysA(1-2) Start earth work 3
B (1-4) Vendor selection 2
C (1-7) Start Handling 1
D (2-3) Continue earth work 3
E (3-6) Finish earth work 2
F (4-5) Ordering raw material 4
G (4-8) Excavation for drains 6
H (5-6) Receiving raw material 5
I (6-9) Base concreting 4
J (7-8) Continue handling 4
K (8-9) Laying drains 5
Draw the network diagram and trace the critical path of the network. What are the various time estimates and the total duration of the above project?
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EST (earliest start time) is calculated by preceding in the forward pass from the first event to the last event. It is calculated by starting from activity A i.e. from event 1 and given it a time zero.
Now, ESTA= 0, ESTB = 0, ESTC = 0,
ESTD = ESTA + Duration A = 0 + 3 = 3
ESTE = ESTD + Duration D = 3+3 = 6
Similarly, ESTs of other activities can be calculated.
ESTF = 2, ESTG = 2, ESTH = 6, ESTI = 11, ESTJ = 1, ESTK = 8
Paths can be possible – either A-D-E-I( 12 days), B-F-H-I (15 days), B-F-G-K (13 days), C-J-K (10 days). Out of which B-F-H-I will be the longest duration hence that will be the critical path. Therefore total project duration = 15 days.
LFT is calculated in the similar manner as EST but in the backward pass i.e. by preceding backward from the last event to the first event therefore LFTI = total project duration – Duration I
= 15 – 4 = 11.
Solution
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LFTj = Duration of the project – Duration K = 15-5 = 10LFTC = LFTj - Duration J = 10 - 4 = 6, LST is calculated by the relation, LST = LFT – Duration of that activity. For example, LSTC = LFTC – Duration C = 6 – 1 = 5 EFT is calculated by the relation, EFT = EST + Duration of that activity. For example, EFTD = ESTD +Duration D = 3 + 3 = 6
Similarly other LFTs, LSTs and EFTs will be calculated accordingly.
Total Float = LST – EST or LFT – EFT. For example, Float B = 0 – 0 or 2 – 2 = 0 (critical
activity) and FloatD = 6 - 3 or 9 – 6 = 3 (non - critical activity).
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The following table shows the different estimated time for the given problem and the figure below shows the required network diagram for the given problem:
Activity Duration EST LST EFT LFT Total Float
Remarks
A (1-2) 3 0 3 3 6 3 -
B (1-4) 2 0 0 2 2 0 Critical
C (1-7) 1 0 5 1 6 5 -
D (2-3) 3 3 6 6 9 3 -
E (3-6) 2 6 9 8 11 3 -
F (4-5) 4 2 2 6 6 0 Critical
G (4-8) 6 2 4 8 10 2 -
H (5-6) 5 6 6 11 11 0 Critical
I (6-9) 4 11 11 15 15 0 Critical
J (7-8) 4 1 6 5 10 5 -
K (8-9) 5 8 8 13 15 2 -
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6/9 11/113/6
0/0
2/2
6/6
15/15
1/6 8/10
Network Diagram
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PERT
It is a probabilistic event oriented project scheduling technique. It is suitable in defense project, R&D project, where the activity time cannot be readily predicted.
PERT can be applied in the following cases:Long – range planningMarketing Promotional ProgramR&D ProjectsDefense ProjectsInstallation of MachineryConstruction ProgramsInstituting Inventory control8Designing Manufacturing prototype products.
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1. Optimistic time (a): 2. Most likely time (m):
3. Pessimistic time (b):
Estimated or Expected time = t = te = (a + 4m + b)/6 Variance of time = σt
2 = [(b-a)/6]2
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PERT Estimated Time
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PERT Probability Calculation
Assume, the critical path consisting of n activities, and denoting the sum of their actual durations by T, this can be written as follows:
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T =
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Mean of t = Te =Variance of T = σt
2 =
Shape of distribution of T: normal probability of meeting schedule Ts
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PERT Probability Calculation
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Steps of Programme Evaluation and Review Techniques
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In an assembly line production following are the time estimate for the activities (per time estimates are given in weeks):
Pert – An Example
Activity a m b
(1,2) 7 11 13(2,3) 1 4 7(2,4) 10 15 48(3,5) 12 20 26(3,6) 4 7 16(3,7) 4 7 16(6,7) 5 8 11(4,7) 2 8 14(7,8) 9 12 15(8,9) 1 4 7
where, a = optimistic time, b = most likely time, c = pessimistic time
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1. Find the expected time, Standard Deviation and variance for each activity.
2. Find the Standard Deviation and expected time for each event.
3. What is the expected time of completion of the project?
4. What is the probability of completing the project in 34 weeks?
5. What is the probability of the event no.7 to be completed in the 20 th week?
Project Management and Appraisal by Sitangshu Khatua
Pert – An Example
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Solution
Activity a m b te SD Variance
(1,2) 7 11 13 10.66667 1 1
(2,3) 1 4 7 4 1 1(2,4) 10 15 48 19.66667 6.333333 40.11111
(3,5) 12 20 26 19.66667 2.333333 5.444444
(3,6) 4 7 16 8 2 4(3,7) 4 7 16 8 2 4(6,7) 5 8 11 8 1 1(4,7) 2 8 14 8 2 4(7,8) 9 12 15 12 1 1(8,9) 1 4 7 4 1 1
1.
te = expected or mean time = (a +4m +b)/6, SD = (b-a)/6, Variance = SD2
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Event Longest path to the event
Expected time Variance SD (Weeks)
1
2 1-2 10.66667 1 1
3 1-2-3 14.666.7 12 + 12 = 1 1
4 1-2-4 30.33334 41.1111 6.4111
5 1-2-3-5 34.33334 46.5555 6.8231
6 1-2-3-6 22.66667 6 2.4494
7 1-2-3-7 22.66667 6 2.4494
8 1-2-3-7-8 34.66667 7 2.6457
9 1-2-3-7-8-9 38.66667 8 2.8284
2.
(iii) The expected time of completion of project is Σ te in the longest path (1-2-3-7-8-9) is 38.66667 = 39 weeks (approx.)
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Solution
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(iv) The probability of the project being completed in 56 weeks for the longest path (1-2-3-7-8-9) is given by,
x is the given no. of weeks = 36, is the mean time = 39 and standard deviation of the longest path = 2.8284 =3 (approx.)
Therefore, from standard normal distribution tables,Probability = 0.5 – 0.4525 = 0.0475 i.e. 45.75%.
The probability of the event no.7 to be completed in the 40th week:Mean time (1-2-3-7)= 22.67 weeks i.e. 23 weeks, SD (1-2-3-7) = 2.4494 weeks, therefore
= 1.667
= (20 – 23)/2.4494 = - 1.223
Therefore, probability = 0.5 – 0.3907 = 0.1093 i.e. 10.93%
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PERT vs. CPM
PERT CPMIt is used where the emphasis on reducing project execution time with out botheration for cost implication.
It is used where the emphasis is on optimizing resource allocation and minimizing overall cost for a given project execution time.
A probabilistic model with uncertainty A deterministic model with well known activity time based on past experience
Three time estimates (optimistic time, most likely time and pessimistic time) are used to make allowances for uncertainties.
It uses single time estimate.
An event oriented technique. An activity oriented techniqueThe use of dummy activity is required for depicting the proper sequence.
The use of dummy activity is not necessary for which diagram becomes slightly simpler.
It is suitable in defense project, R&D where the activity time cannot be readily predicted.
It is suitable for problems in industrial plant maintenance, civil construction projects etc.
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Crashing of Project Network
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• Normal Time (NT):
• Crash Time (CT):
• Normal Cost (NC):
• Crash Cost (CC):
• Cost slope:
Terms Related to Crashing of project
=
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Network Cost Control
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to– Time of update or Time Now
tc – Scheduled project completion time
tf – Forecasted project completion time
ACWP – Actual cost of work in place at t0
BCWS – Budgeted Cost of Work Scheduled for Completion at t0
BCWP – Budgeted Cost of Work in Place at t0
Cost Variance at t0 = ( BCWP –ACWP)/(BCWP)100% Scheduled Variance at t0 = ((BCWP-BCWS)/BSWP ) 100% The cost variance gives the total percentage of project cost over (under) run upto time t0 and is used for the forecasting of the total project cost.
Project Management and Appraisal by Sitangshu Khatua
Network Cost Control
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Resource leveling:
Resources Smoothing:
Resource Allocation:
Critical chain (CC):
Project buffers:
Feeding buffer:
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Critical Chain and the Buffer Management Approach
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Item Equivalence Meaning BCWS = Budgeted Cost and Work Scheduled
PV = Planned Value Sum of authorized budget (from start to status date)
BCWP = Budgeted Cost and Work Performed
EV = Earned Value Sum of authorized budget for work actually performed
ACWP = Actual Cost of Work Performed
AC = Actual Cost Actual cost incurred, up to status date
BAC = Budget at Completion BAC = Budget at Completion The sum of all authorized budget for the project
CV = Cost Variance CV = Cost Variance CV = BCWP-ACWP (EV-AC)
SV = Scheduled Variance SV = Scheduled Variance SV = BCWP-BCWS (EV-PV)
CPI = Cost Performance Index CPI = Cost Performance Index CPI = BCWP/ACWP
SPI = Scheduled Performance index
SPI = Scheduled Performance index
SPI = BCWP/BCWS
CR = Critical Ratio CR = Critical Ratio CR = CPI×SPI
Terminology used in Earn Value Management
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Projected completion time and cost at the end of the project
Cost at CompletionOptimistic Likely Pessimistic
Formula Actual cost + (BAC – BCWP)
Actual cost + (BAC – BCWP)/CPI
Actual cost + (BAC – BCWP)/(CPI× SPI)
ACWP + (BAC-BCWP) (BAC/ CPI) ACWP + (BAC-BCWP) /(CPI× SPI)
Logic No further slippage will occur
Balance cost will be incurred at current efficiency
There is a time/cost relation
Time at CompletionFormula Scheduled work that
should have been completed in elapsed time + time remaining as per schedule
Actual time spent + time remaining as per schedule decided by SPI
Actual time spent + time remaining as per schedule decided by product of SPI + CPI
Elapsed time/SPI + time remaining as per schedule
Total scheduled time/ SPI
Actual time spent + time remaining as per schedule/CR
Logic Only current delay will spill over, rest will be as per schedule
Further delays will discuss at current efficiencies
Cost efficiency may slow down work
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Project S -curve
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Criterion PERT/CPM PERT/Cost LOB GERT VERT
Project Phase Acceptability
Prime application to one time projects, largely design and development phase
Same as basic PERT/CPM
Production only Most value in concept phase; usable in all phases to some degree
Most value in concept phase; usable in all phases to some degree
Parametric Focus Time oriented; treats performance and costs as objectives, constraints or by products
Add cost planning and control feature to basic PERT/CPM
Time-Oriented schedule and quantity
Time oriented add on cost feature, analyzes time and cost
Fully treats time costs and various performance measures; analyzes risk in all three.
Preparation Requirements
Network and Time estimating is significant, but is planning which should be done anyway
Cost estimating work packages and activity is significant addition to PERT preparation, but should be done anyway
Main requirement is production flow chart and cycle time
Networking requires special familiarity; multitude of features add complexity
Same comments as for GERT; use of optional features increases requirements
Evaluation of Major Network Based Project Management Techniques
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System Operating Cost
Programs easy to use, main cost is effort of preparation and updating
Canned programs expand basic PERT; largest cost by far is preparation
Practically non-existent, especially if part of MRP or other system
Function of Database simulation requires multiple runs; input preparation appreciable
Same comment as for GERT; to use additional features increases cost
Comprehensiveness Limited to time parameter and non-repetitive activities
Limited to time and cost parameter and non-repetitive activities
Limited to repetitive situations only
Accommodates most types of activity
Accommodates most types of activity plus numerous inputs
Database By-product of preparation as is quality of data
Cost accumulation and control requires extensive data input
Requires only time and quantity at selected control points
Direct function of the number of feature selected; large if technique fully utilized
Direct function of the number of features selected; large if fully utilized
Project Management and Appraisal by Sitangshu Khatua
Evaluation of Major Network Based Project Management Techniques
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Flexibility Handles deterministic situations only, no ability to accommodate decision
Deterministic only , same as PERT
Deterministic situations only; fixed production cycle required; learning curve presents problem
Accommodates stochastic and deterministic activities
Significantly more optional input and output features than has budgeting capability
Ease of Update Relatively simple, requires discipline to ensure that future activities are re-evaluated. Actual times present little problem
Theoretically simple but major efforts in practice; “estimating actual” cost data and constant changes are problems
Requires only a physical count of cumulative production
Appreciable, but value of technique of planning, rather than control
Appreciable, but value of technique of planning, rather than control
Focus Reporting Highlighting of critical activities and problem areas are strong point; forecasts status at completion
Adds to PERT the ability to trade cost problems to the source
Highlights potential delivery schedule problem areas
Risk analysis focuses attention on hat is likely to occur and its probability
Analyzes and highlights outcomes in time, costs, and performance; can be used in a non project strategic planning
PERT: Program Evaluation and Review Techniques; CPM: Critical Path Method; LOB: Line of Balance; VERT: Venture Evaluation and Review Techniques; GERT: Graphical Evaluation and Review Techniques.
Project Management and Appraisal by Sitangshu Khatua
Evaluation of Major Network Based Project Management Techniques