Operations Management - Project Management

Project Management

Learning Objectives

• Understand the concept of project and project management.
• Understand how to apply the critical path method (CPM).
• Understand project crashing.
• Understand project uncertainty.

Project

• A temporary and customized initiative that consists of many smaller tasks and activities that must be coordinated and completed.
  • Goal: To finish the entire initiative on time and within budget.

Project Management

• Planning, directing, and controlling resources (people, equipment, material, etc.) to meet the technical, cost, and time constraints of the project.

Importance of Project Management

• At the highest levels of an organization, management often involves juggling a portfolio of projects.
• Defines a plan and organizes chaos.
• Establishes a schedule and plan.
• Facilitates learning from failure.

Project Management Activities

• Project definition: Defining goals, scope, risks, budget, timeline, and resources.
• Project planning:
  • Identifying the activities that must be completed and the sequence to perform them.
  • Determining resource and financing needs for each activity.
• Project scheduling: Specifying a time schedule for the completion of each activity.
• Project control: Establishing controls for determining progress and responding to problems.

Project Success

• Time
• Cost
• Client satisfaction
• Quality

Work Breakdown Structure (WBS)

• Defines the hierarchy of project tasks, subtasks, and work packages.
• Levels:
  • Level 1: Program
  • Level 2: Project
  • Level 3: Task
  • Level 4: Subtask
  • Level 5: Work package

Project Definition Activities

• Activities: Discrete tasks that consume resources and time.
• Immediate predecessors: Activities that must be completed immediately before an activity may start.
• Precedence relationships: Ensure that activities are performed in the proper sequence when they are scheduled.

Project Network

• Consists of nodes and arcs, which define the precedence relationships between activities.
  • Nodes: Set of circles or boxes, which represent activities.
  • Arcs: Set of arrows.
• This is called an activity-on-node (AON) network representation.

Critical Path Method (CPM)

• Critical path: Sequence of activities that takes the longest time and defines the total project completion time.
• We need to find two starting times and two ending times for each activity to conduct CPM:
  • Earliest Start (ES): Earliest possible date on which an activity can start.
  • Earliest Finish (EF): Earliest possible date on which an activity can be completed. EF = ES + T, where T is activity duration.
  • Latest Start (LS): Latest possible date that an activity may begin without delaying the project completion. LS = LF - T
  • Latest Finish (LF): Latest possible date an activity can be completed without delaying the project completion. LF = LS + T

Slack Time

• Slack time is the length of time an activity can be delayed without delaying the entire project. Slack = LS – ES or LF – EF
• Critical Path: Activities with Zero slack are critical activities.

Activity-on-Node Format and Definitions

• Identification number (N) of the activity.
• Normal time (T) to complete the activity.
• Earliest start [ES] time.
• Earliest finish (EF) time.
• Latest start [LS) time.
• Latest finish (LF) time.
• Slack time (ST)—the length of time an activity can be delayed without affecting the competition date for the entire project, computed as ST = LS - ES = LF – EF

Forward and Backward Passes

• Forward Pass
  • Proceed through project diagram from start to finish activity.
  • Provide earliest start and earliest finish times for each activity
  • These are referred to as ES and EF.
• Backward Pass
  • Proceed through project diagram from finish to start (Reverse).
  • Provide latest start and latest finish times for each activity.
  • These are referred to as LS and LF.

Wildcat Software Consulting INC

• Wildcat software company helps companies implement software integration projects.
• Project manager must coordinate the design and installation of the new software system.
• Project objective: To develop an integrative software package within a predetermined budget and promised project completion date that meet all system requirements while providing adequate interfaces with legacy systems

Project Control

• Gantt charts graphically depict the project schedule.
• Project management software can assist in allocating limited resources that are shared among all the activities.

Crashing a Project

• Crashing a project: Reducing the total time to complete the project to meet a revised due date.
• Crash time: Shortest possible time the activity can realistically be completed.
• Crash cost: Total additional cost associated with completing an activity in its crash time rather than in its normal time.
• Crash cost per unit of time = (Crash cost - normal cost) / (normal time - crash time)
• Crashing an activity: Reducing its normal time, possibly up to its limit, the crash time.

Uncertainty in Project Management

• Project evaluation and review technique (PERT) is another approach to project management.
• PERT was developed to handle uncertainties in activity completion times.
• In contrast, CPM assumes that activity times are constant.

PERT

• PERT planning usually involves the following steps:
  • Identifying Tasks and Milestones
  • Placing the Tasks in a Proper Sequence
  • Network Diagramming

Uncertainty in Project Management (PERT)

• PERT estimates are obtained for each activity
  • Optimistic time - Activity time under ideal conditions
  • Most probable time - Most likely activity time under normal conditions
  • Pessimistic time - Activity time if breakdowns or serious delays occur

Uncertainty in Project Management Equations

• Expected Time = (a + 4m + b)/6
• Variance = (b – a)^2/36
  • Where:
    • a is the optimistic time estimate
    • m is most likely or probable
    • b is the pessimistic time estimate
• PERT assumes a beta probability distribution.

Solution example Equations

• Expected Time = (a + 4m + b)/6

• Variance = (b – a)^2/36

• The z-value for the normal distribution a T =25 is given by Z = (25-22)/1.697 =1.77

• Variance (\sigma^2) of the critical path activities: 1.78+0.11+ 0.44+0.11+0.11+0.11+0.11 =2.78

• Standard Deviation = \sqrt{2.78} = 1.67

• Using Z score equation

• Using Z=1.77 and the standard normal distribution table

• We find that the probability of the project meeting the 25 week deadline is (PZ <= 1.77) = 0.9616 = 96.16%

• 1.697weeks Z = (25-22)/1.697 =1.77

Homework Problem

• Problem 6 in page 102
• Problem 8 in page 103
• Problem 10 in page 104
• Problem 14 in page 105