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1

PROJECT MANAGEMENTChapter 17

MIS 373: Basic Operations Management

MIS 373: Basic Operations Management 2

LEARNING OBJECTIVES

• After this lecture, students will be able to 1. Describe the project management constraints2. Describe the project life cycle3. Give a general description of the critical path method4. Construct simple network diagrams5. Describe the time-cost trade-offs6. Explain “crashing” activities7. Use the “crashing” procedure to shorten activity duration


PROJECTS

• Project:• Unique, one-time operations designed to accomplish a

specific set of objectives in a limited time frame• Examples:

• Tucson Streetcar• Producing a movie• Product development

• Operations:• work done to sustain the business


THE NATURE OF PROJECTS

• Projects go through a series of stages – a life cycle• Project Life Cycle

1. Initiating2. Planning3. Executing4. Monitoring and Controlling5. Closing

• Projects bring together people with a diversity of knowledge and skills, most of whom remain associated with the project for less than its full life

• Organizational structure affects how projects are managed


PROJECT MANAGEMENT

• Project management is “the application of knowledge, skills, tools and techniques to project activities to meet project requirements” (PMBOK® Guide, Fourth Edition, 2008)

• Involves continual trade-offs• Manager’s job - manage these trade-offs.

• Project management knowledge draws on ten areas:Integration Scope TimeCost Quality ProcurementHuman resources Communications Risk managementStakeholder management


Integration Develop Project Charter Develop Project Management

Plan Direct and Manage Project Work Monitor and Control Project

Work Perform Integrated Change

Control Close Project or Phase

Scope Plan Scope Management Collect Requirements Define Scope Create Work Breakdown

Structure Verify Scope Control Scope

Time Plan Schedule Management Define Activities Sequence Activities Estimate Activity Resources Estimate Activity Durations Develop Schedule Control Schedule

Cost Plan Cost Management Estimate Costs Determine Budget Control Costs

Quality Plan Quality Perform Quality Assurance Perform Quality Control

Human Resources Plan Human Resource

Management Acquire Project Team Develop Human Resource Plan Manage Project Team

Communication Plan Communications

Management Manage Communications Control Communications

Risk Management Plan Risk Management Identify Risks Perform Qualitative Risk

Analysis Perform Quantitative Risk

Analysis Plan Risk Responses Control Risks

Procurement Plan Procurement Management Conduct Procurements Administer Procurements Close Procurements

Stakeholder Management Identify Stakeholders Plan Stakeholder Management Manage Stakeholder

Engagement Control Stakeholder Engagement

Source: PMBOK® Guide


THE PROJECT MANAGEMENT TRIANGLE

• Project’s Triple Constraints (Key Metrics)

Quality

Scope

TimeCo

st

WEBQUEST• Tucson Streetcar

• http://www.tucsonstreetcar.com/index.php?pg=24 • Other than the above webpage, you may also use other webpages or

resources to complete this exercise.

• Identify and discuss the following 10 project management knowledge elements from the Tucson streetcar project. (10 minutes)

Integration Scope TimeCost Quality ProcurementHuman resources Communications Risk managementStakeholder management

http://www.tucsonstreetcar.com/index.php?pg=24

http://www.tucsonstreetcar.com/index.php?pg=24

WEBQUESTElement Tucson StreetcarScopeCostHuman resourcesStakeholder managementTimeQualityCommunicationsIntegrationProcurementRisk management


PROJECT SUCCESS

• There are several ways to define project success:• The project met scope, time, and cost goals• The project satisfied the customer/sponsor• The results of the project met its main objective

• e.g., making or saving a certain amount of money, providing a good return on investment.


PROJECT MANAGER• Project managers work with the project team and other people

involved in a project to meet project goals• The project manager is ultimately responsible for the success or

failure of the project• The project manager skills and competencies:

• People skills• Leadership• Listening• Integrity, ethical behavior, consistent• Strong at building trust• Verbal communication• Strong at building teams• Conflict resolution, conflict management• Critical thinking, problem solving• Understands, balances priorities


BEHAVIORAL ISSUES

• Behavioral problems can be created or exacerbated by• Decentralized decision making• Stress of achieving project milestones on time and within budget• Surprises

• The team must be able to function as a unit• Interpersonal and coping skills are very important• Conflict resolution and negotiation can be an important part of a

project manager’s job

A VIDEO SUMMARY• [YouTube] Introduction to Project Management

https://www.youtube.com/watch?v=BOU1YP5NZVA


TOOLS IN PROJECT MANAGEMENT

• Key tools:• Work Breakdown Structure• Network diagram• Critical path method• Gantt charts• Crashing


WORK BREAKDOWN STRUCTURE (WBS)

• WBS• A hierarchical listing of what must be done during a project

• Establishes a logical framework for identifying the required activities for the project

1. Identify the major elements of the project2. Identify the major supporting activities for each of the major elements3. Break down each major supporting activity into a list of the activities that

will be needed to accomplish it

Projec

t

Level 1Level 2Level 3Level 4


NETWORK DIAGRAM

• Network diagram• (precedence) Diagram of project activities that

shows sequential relationships by use of arrows and nodes

• Activity on arrow (AOA)• Network diagram convention in which arrows designate

activities• Activity on node (AON)

• Network convention in which nodes designate activities


NETWORK CONVENTIONS (AON)

dummyNode

a

bc a

b

c

a

b

c

d

a

b

c

(dummy) StartNode


NETWORK CONVENTIONS (AOA)

a

b

c ab

c

a

b

c

d

a

b

c

dummyActivity


PRECEDENCE DIAGRAM

# Task Duration

(weeks)

Immediate Predecess

or

1 Locate facility 8 -2 Order furniture 6 13 Interview 4 -4 Hire & Train 9 35 Remodel 11 16 Furniture setup 3 27 Move in 1 4,5,6


PROJECT NETWORK – ACTIVITY ON NODE (AON)

# Task Duration

(weeks)

Immediate Predecess

or

1 Locate facility 8 -2 Order

furniture6 1

3 Interview 4 -4 Hire & Train 9 35 Remodel 11 16 Furniture

setup3 2

7 Move in 1 4,5,6

1

S

3

2

5

6

Locatefacilities

Orderfurniture

Furnituresetup

Interview

RemodelMove in

4

Hire & train

7


PROJECT NETWORK – ACTIVITY ON ARROW (AOA)

# Task Duration

(weeks)

Immediate Predecess

or


furniture6 1


setup3 2

7 Move in 1 4,5,6

Locatefacilities

Orderfurniture

Furnituresetup

InterviewHire andtrain

Remodel

Move in


GANTT CHART

# Task Duration

(weeks)

Immediate Predecesso

r

Weeks after start 2 4 6 8 10 12 14 16 18 20

1 Locate facility 8 -3 Interview 4 -

4 Hire & Train 9 3

2 Order furniture 6 15 Remodel 11 16 Furniture

setup3 2

7 Move in 1 4,5,6

start


CRITICAL PATH METHOD (CPM)

• An analytical tool that provides a schedule that completes the project in minimum time subject to the precedence constraints.

• In addition, CPM provides:• Starting and ending times for each activity• Identification of the critical activities (i.e., the ones whose

delay necessarily delay the project). • Identification of the non-critical activities, and the amount

of slack time available when scheduling these activities.



• Path• Sequence of activities that leads from the starting node to

the finishing node• Critical path

• The longest path; determines expected project duration• Critical activities

• Activities on the critical path



• CPM can assist in:1. Estimating project length2. Identifying which activities are most critical to timely

project completion3. Indicating of how long any activity can be delayed

without delaying the project


PROJECT NETWORK – ACTIVITY ON NODE (AON)

# Task Duration

(weeks)

Immediate Predecess

or


furniture6 1


setup3 2

7 Move in 1 4,5,6

1

S

3

2

5

6

Locatefacilities

Orderfurniture

Furnituresetup

Interview

RemodelMove in

4

Hire & train

7

Critical Path ?


CRITICAL PATH • Critical path: the longest path

# Task Duration

(weeks)

Immediate Predecess

or


furniture6 1


setup3 2

7 Move in 1 4,5,6

1

S

3

2

5

6

Locatefacilities

Orderfurniture

Furnituresetup

Interview

RemodelMove in

4

Hire & train

7

8

6

3

111

49Length of

Path (1, 2, 6, 7) = 8+6+3+1 = 18Path (1, 5, 7) = 8+11+1 = 20Path (3, 4, 7) = 4+9+1 = 14

Critical path & expected finish time


GANTT CHART

# Task Duration

(weeks)

Immediate Predecesso

r

Weeks after start 2 4 6 8 10 12 14 16 18 20

1 Locate facility 8 -3 Interview 4 -

4 Hire & Train 9 3

2 Order furniture 6 15 Remodel 11 16 Furniture

setup3 2

7 Move in 1 4,5,6

startCritical Path



• Advantages:• Forces managers to organize• Provides graphic display of

activities• Identifies

• Critical activities• Slack activities

• Disadvantages/ Problems• Important activities may be

omitted• Precedence relationships may

not be correct• Time estimates may be

inaccurate• May focus solely

on critical path

EXERCISE PROBLEMS• The following table contains information related to the major

activities of a research project. Use the information to do the following:

a) Draw a precedence diagram using AOA.b) Find the critical path.c) Determine the expected length of the project.

Here are some additional hints for constructing a precedence diagram.1) Use pencil.2) Start and end with a single node.3) Avoid having paths cross each other.4) Have activities go from left to right.5) Use only one arrow between any pair of nodes.

EXERCISE SOLUTIONS• The following table contains information related to the major


a) Draw a precedence diagram using AOA.

EXERCISE SOLUTIONS• The following table contains information related to the major


b) Find the critical path.c) Determine the expected length of the project.


TIME-COST TRADE-OFFS

• Activity time estimates are made for some given level of resources

• It may be possible to reduce the duration of a project by injecting additional resources• Motivations:

• To avoid late penalties• Monetary incentives• Free resources for use on other projects

CASE• I-10 Widening: Prince Road to

29th Street• Started on January 2007. Originally

expected to be complete in three years, but completed by August 2009, approximately eight months ahead of schedule.

• The contractor (Kiewit/Sundt Joint Venture) got a $920,000 bonus for finishing early. The bonus was based on a $23,000-per-day incentive (for finishing up to 40 days early).


TIME-COST TRADE-OFFS: CRASHING

• Crashing• Shortening activity durations

• Typically, involves the use of additional funds to support additional personnel or more efficient equipment (and the relaxing of some work specifications)

• The project duration may be shortened by increasing direct expenses (e.g., additional personnel, more efficient equipment), thereby realizing savings in indirect project costs (e.g., facilities, supervision)


CRASHING ACTIVITIES


CRASHING DECISIONS

• To make decisions concerning crashing requires information about:

• Time: • Regular time and crash time estimates for each activity

• Cost: • Regular cost and crash cost estimates for each activity

• A list of activities that are on the critical path• Critical path activities are potential candidates for crashing• Crashing non-critical path activities would not have an impact on

overall project duration


CRASHING: PROCEDURE

• General procedure:1. Crash the project one period at a time2. Crash only activities on the critical path/s3. Crash the least expensive activity (that is on the critical

path)4. When there are multiple critical paths, find the sum of

crashing the least expensive activity on each critical path• If two or more critical paths share common activities, compare

the least expensive cost of crashing a common activity shared by critical paths with the sum for the separate critical paths


Indirect costs: $1,000 / day(that is, the entire project saves $1000 if it finishes one day earlier, $2000 if it finishes two day earlier,and so on.)

Activity Normal time

[days]

Crash (min) time

[days]

Available time(crash-normal)

[days]

Cost to Crash [$/day]

a 6 6 - -b 10 8 2 500c 5 4 1 300d 4 1 3 700e 9 7 2 600f 2 1 1 800

6a

4d

5c

10b

9 e

2f


1. Determine Critical Path

Path Lengtha-b-f 18c-d-e-f 20 (critical path)

2. Rank activities on CP in order of lowest crashing cost

Activity Cost per day to crash Available daysc 300 1e 600 2d 700 3f 800 1

Activity Normal time

[days]

Crash (min) time

[days]

Available time

(crash-normal)[days]

Cost to Crash

[$/day]

a 6 6 - -b 10 8 2 500c 5 4 1 300d 4 1 3 700e 9 7 2 600f 2 1 1 800

6a

4d

5c

10b

9 e

2f


Crash activity c by 1 day: cost $300 < $1,000 (CP=19 days)(cannot crash c anymore)

6a

4d

5c

10b

9 e2f

4


Activity Cost per day to crash Available daysc 300 1e 600 2d 700 3f 800 1


Crash activity e by 1 day: cost $600 < $1,000 (CP=18 days)(may crash activity e by 1 more day)

• Both paths are now critical. • Have to crash both in order to shorten project.

6a

4d

5c

10b

e2f

4

9


Activity Cost per day to crashAvailable daysc 300 1e 600 2d 700 3f 800 1

8


Both paths are now critical. Have to crash both in order to shorten project.

Remaining activitiesPath Activity Cost per day to crash Available daysa-b-f a - -

b 500 2f 800 1

c-d-e-f c - -e 600 1d 700 3f 800 1

Crash activity f (is on both paths) by 1 day: cost = $800 < $1,000 (CP=17 days)

6a

4d

4c

10b

8 e

2f


Crash activity f (is on both paths) by 1 day: cost $800 < $1,000 (CP=17 days)

6a

4d

4c

10b

8 e1f

2

Remaining activitiesPath Activity Cost per day to crashAvailable daysa-b-f a - -

b 500 2f 800 1

c-d-e-f c - -e 600 1d 700 3f 800 1


Crash activity b by 1 day: cost $500 ANDCrash activity e by 1 day: cost $600Total cost: $1,100>$1,000 (indirect costs) =>DONE!

Both paths are still critical. Have to crash both in order to shorten project.

Remaining activitiesPath Activity Cost per day to crash Available daysa-b-f a - -

b 500 2f - -

c-d-e-f c - -e 600 1d 700 3f - -

6a

4d

4c

10b

8 e

1f


Length after crashingPath\crash n=0 1 2 3 a-b-f 18 18 18 17c-d-e-f 20 19 18 17

Activity Crashed c e fCost 0 ($300) ($600) ($800)Savings 0 $1,000 $1,000 $1,000Total 0 $700 +$400 +$200 = $1,300

EXERCISE PROBLEMS• Costs for a project are $12,000 per week for as long as the

project lasts. The project manager has supplied the cost and time information shown. Use the information to

a) Determine an optimum crashing plan.b) Summarize the total costs for the plan.

EXERCISE SOLUTIONSa) Determine an optimum crashing plan.

Step 1: Compute path lengths and identify the critical path:

Step 2: Rank critical activities according to crash costs:Activity b should be shortened one week since it has the lower crashing cost. This would reduce indirect costs by $12,000 at a cost of $3,000, for a net savings of $9,000.

2

13

EXERCISE SOLUTIONSa) Determine an optimum crashing plan.

Step 3: Rank activities by crashing costs on the two critical paths: At this point, paths a-b and e-f would both have a length of 23 weeks, so both would be critical.

Choose one activity (the least costly) on each path to crash: b on a-b and f on e-f, for a total cost of $4,000 + $2,000 = $6,000 and a net savings of $12,000 − $6,000 = $6,000.

2

13

1

12

70

SOLUTIONSa) Determine an optimum crashing plan.

Step 4: Check to see which path(s) might be critical:

Step 5: Rank activities on the critical paths: Crash b on path a-b and e on e-f for a cost of $4,000 + $6,000 = $10,000, for a net savings of $12,000 − $10,000 = $2,000.

a-b and e-f would be 22 weeks in length, and c-d would still be 19 weeks.

2

13

1

12

70

0

2

11

14

SOLUTIONSa) Determine an optimum crashing plan.

Step 7: At this point, no further improvement is possible: Paths a-b and e-f would be 21 weeks in length, and one activity from each path would have to be shortened. This would mean activity a at $11,000 and e at $6,000 for a total of $17,000, which exceeds the $12,000 potential savings in costs.

Step 6: Check to see which path(s) might be critical:Paths a-b and e-f would be 21 weeks in length, and c-d would still be 19 weeks.

2

13

1

12

70

0

2

11

14

EXERCISE SOLUTIONSb) Summarize the total costs for the plan.

The following table summarizes the results, showing the length of the project after crashing n weeks:

A summary of costs for the preceding schedule would look like this:

Crash: bCrash: b, fCrash: b, e

No crash

* Total Cost = Cumulative Crashing Cost + Indirect Cost


PROJECT MANAGEMENT SOFTWARE

• Project management software• Specialized software used to help manage projects

• Assign resources• Evaluate changes• Track performance/schedule

• Advantages• Imposes a methodology• Provides logical planning structure• Enhances team communication• Flag constraint violations• Generates reports• Enables what-if scenarios• Generates various chart types

So far over 150 software are listed on Wikipedia

“Comparison of project management software”

page.


RISK MANAGEMENT

• Risks are an inherent part of project management• Risks relate to occurrence of events that have undesirable

consequences such as• Delays• Increased costs• Inability to meet technical specifications

• Good risk management involves• Identifying as many risks as possible• Analyzing and assessing those risks• Working to minimize the probability of their occurrence• Establishing contingency plans and budgets for dealing with

any that do occur


KEY POINTS

• Projects are unique, limited duration sets of tasks designed to accomplish a set of objectives.

• The key project metrics are cost, time, and performance.• The project manager and the project team can be major

factors in achieving project goals.• Work breakdown structures, Gantt charts, and network

diagrams are useful tools for managing projects.• We may consider crashing activities to optimize the time-cost

trade-offs: increase direct cost but decrease indirect cost as a result of shorter project time.

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