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Chapter 7 Project Management. © 2007 Pearson Education. Project Management. Used to manage large complex projects Has three phases: Project planning Project scheduling Project controlling. Phase 1: Project Planning. What is the project goal or objective?

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Chapter 7Project Management

© 2007 Pearson Education


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Project Management

  • Used to manage large complex projects

  • Has three phases:

    • Project planning

    • Project scheduling

    • Project controlling


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Phase 1: Project Planning

  • What is the project goal or objective?

  • What are the activities (or tasks) involved?

  • How are activities linked?

  • How much time required for each activity?

  • What resources are required for each activity?


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Phase 2: Project Scheduling

  • When will the entire project be completed?

  • What is the scheduled start and end time for each activity?

  • Which are the “critical” activities?

  • Which are the noncritical activities?


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Phase 2: Project Scheduling (cont.)

  • How late can noncritical activities be w/o delaying the project?

  • After accounting for uncertainty, what is the probability of completing the project by a specific deadline?


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Phase 3: Project Controlling

At regular intervals during the project the following questions should be considered:

  • Is the project on schedule? Early? Late?

  • Are costs equal to the budget? Over budget? Under budget?

  • Are there adequate resources?

  • What is the best way to reduce project duration at minimum cost?


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Identifying Activities

  • Subdivides a large project into smaller units

  • Each activity should have a clearly defined starting point and ending point

  • Each activity is clearly distinguishable from every other activity

  • Each activity can be a project in itself


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Work Breakdown Structure (WBS)

Divides the project into its various subcomponents and defines hierarchical levels of detail

Level

1 Project

2 Major tasks in project

3 Subtasks in major tasks

4 Activities to be completed



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Identify for Each Activity:

  • Which other activities must be completed previously (predecessors)

  • Time required for completion

  • Resources required

    This completes the project planning phase.


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Project Scheduling Phase

Commonly used techniques:

  • Program Evaluation and Review Technique (PERT)

  • Critical Path Method (CPM)


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Project Management Example:General Foundry Inc.

  • Have 16 weeks to install a complex air filter system on its smokestack

  • May be forced to close if not completed w/in 16 weeks due to environmental regulations

  • Have identified 8 activities


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Drawing the Project Network

  • AON – Activity on Node networks show each activity as a node and arcs show the immediate predecessor activities

  • AOA – Activity on Arc networks show each activity as an arc, and the nodes represent the starting and ending points

    We will use the AON method




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Determining the Project Schedule

  • Some activities can be done simultaneously so project duration should be less than 25 weeks

  • Critical path analysis is used to determine project duration

  • The critical path is the longest path through the network


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Critical Path Analysis

Need to find the following for each activity:

  • Earliest Start Time (EST)

  • Earliest Finish Time (EFT)

  • Latest start time (LST)

  • Latest Finish Time (LFT)


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Forward Pass

  • Identifies earliest times (EST and EFT)

  • EST Rule: All immediate predecessors must be done before an activity can begin

    • If only 1 immediate predecessor, then

      EST = EFT of predecessor

    • If >1 immediate predecessors, then

      EST = Max {all predecessor EFT’s}


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  • EFT Rule:

    EFT = EST + activity time

    Node Notation:



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Backward Pass

  • Identifies latest times (LST an LFT)

  • LFT Rule:

    • If activity is the immediate predecessor to only 1 activity, then

      LFT = LST of immediate follower

    • If activity is the immediate predeccor to multiple activities, then

      LFT = Min {LST of all imm. followers}


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Slack Time and Critical Path(s)

  • Slack is the length of time an activity can be delayed without delaying the project

    Slack = LST – EST

  • Activities with 0 slack are CriticalActivities

  • The Critical Path is a continuous path through the network from start to finish that include only critical activities




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Total Slack Time vs. Free Slack Time

  • Total slack time is shared by more than 1 activity

    Example: A 1 week delay in activity B will leave 0 slack for activity D

  • Free slack time is associated with only 1 activity

    Example: Activity F has 6 week of free slack time


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Variability in Activity Times

  • Activity times are usually estimates that are subject to uncertainty

  • Approaches to variability:

    • Build “buffers” into activity times

    • PERT – probability based

    • Computer simulation


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PERT Analysis

  • Uses 3 time estimates for each activity

    Optimistic time (a)

    Pessimistic time (b)

    Most likely time (m)

  • These estimates are used to calculate an expected value and variance for each activity (based on the Beta distribution)


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  • Expected activity time (t)

    t = (a + 4m + b)

    6

  • Variance = [ (b – a) / 6 ]2

  • Standard deviation = SQRT(variance)

    = (b – a)

    6

    Go to file 7-1.xls


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Project Variance and Standard Deviation

  • Project variance (σp2)

    = ∑ (variances of all critical path activities)

    σp2 = 0.11 + 0.11 + 1.0 + 1.78 + 0.11

    = 3.11

  • Project standard deviation (σp)

    = SQRT (Project variance)

    σp = SQRT ( 3.11) = 1.76


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Probability of Project Completion

  • What is the probability of finishing the project within 16 weeks?

  • Assumptions:

    • Project duration is normally distributed

    • Activity times are independent

  • Normal distribution parameters:

    μp = expected completion time= 15 weeks

    σp = proj standard deviation = 1.76 weeks


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Normal Probability Calculations

Z = (Target time – expected time)

σp

Z = (16 - 15) = 0.57

1.76

This means 16 weeks is 0.57 standard deviations above the mean of 15 weeks.


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Probability Based on Standard Normal Table

Prob (proj completion < 16 weeks) = 0.7158


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Project Duration fora Given Probability

  • What project duration does General Foundry have a 99% chance of completing the project within?

    i.e. Prob (proj duration < ? ) = 0.99

  • From Std. Normal Table, this corresponds to Z = 2.33


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Z = (? - 15) = 2.33

1.76

So ? = 15 + 2.33 x 1.76 = 19.1 weeks


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Scheduling Project Costs

  • Estimate total cost for each activity

  • Identify when cost will actually be spent

    (we will assume costs are spread evenly)

  • Use EST and LST for each activity to determine how costs are spread over project


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Monitoring and Controlling Project Costs

  • While the project is underway, costs are tracked and compared to the budget

  • What is the value of work completed?

    Value of work completed

    = (% of work completed) x (total activity budget)

  • Are there any cost overruns?

    Cost difference

    = (Actual cost) – (Value of work completed)


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Project Crashing

  • Reducing a project’s duration is called crashing

  • Some activities’ times can be shortened (by adding more resources, working overtime, etc.)

  • The crash time of an activity is the shortest possible duration, and has an associated crash cost


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Steps in Project Crashing

  • Compute the crash cost per time period

  • Find the current critical path (CP)

  • Find the lowest cost way to crash the CP by 1 time period

  • Update all activity times. If further crashing is needed, go to step 2.


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Crashing UsingLinear Programming

Decision: How many time periods to crash each activity?

Objective: Minimize the total crash cost

Decision Variables

Ti = time at which activity i starts

Ci = number of periods to crash activity i


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Constraints

  • An activity cannot begin before all immediate predecessors are complete

  • There is a maximum amount that each activity can be crashed

    Go to file 7-2.xls