Chapter 3 - Project Management - Chapter 3 PDF

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FARE*3310 – Operations Management – Chapter 3 – Project ManagementWhat is a Project?- A project is an interrelated set of activities with a definite starting and ending point, which results in a unique outcome for a specific allocation of resources - Projects are unique, one-time operations designed...

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FARE*3310 – Operations Management – Chapter 3 – Project Management What is a Project? -

A project is an interrelated set of activities with a definite starting and ending point, which results in a unique outcome for a specific allocation of resources Projects are unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame Examples: Constructing (expansion) of the UoG Athletic Centre, planning and running a federal (provincial) political campaign, launching the space shuttle, designing new products/services, etc.

The management of products involve: -

Planning – goal setting, defining the project, tram organization Scheduling – relates people, money, and supplies to specific activities and activities to each other Controlling – monitors resources, costs, quality, and budgets; revises plans and shifts resources to meet time and cost demands

Project planning involves: -

Establishing objectives Defining project Creating work breakdown structure Determining resources Forming organization

Work Breakdown Structure (WBS) -

A statement of all work that has to be completed WBS is a hierarchical description of a project into more and more detailed components Level 1. Project 2. Major tasks in the project 3. Subtasks in the major tasks 4. Activities (or work packages) to be completed

Project Scheduling -

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Project scheduling involves: o Identifying precedence relationships o Sequence activities o Determining activity times and costs o Estimating material and work requirements o Determining critical activities The purposes of project scheduling are: o Shows the relationship of each activity to others and to the whole project o Identifies the precedence relationships among activities o Encourages the setting of realistic time and cost estimates for each activity o Helps make better use of people, money, and material resources by identifying critical bottlenecks in the project

Project Controlling -

Project controlling involves close monitoring of resources, costs, quality, and budgets; and revision of plans and shifts resources to meet time and cost. The output of project control involves reports on: o Detailed cost breakdowns for each task o Total program labor curves o Cost distribution tables o Functional cost and hour summaries o Raw materials and expenditure forecasts o Variance reports o Time analysis reports o Work status reports

Project Management Techniques -

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Gantt chart o Gantt chart is a project schedule that superimposes project activities, with their precedence relationships and estimated duration times, on a timeline Critical Path Method (CPM) o A network planning method initially developed as a means of scheduling maintenance shutdowns at chemical processing plants Program Evaluation and Review Techniques (PERT) o A network planning method created for the US Navy’s Polaris missile project

Gantt Chart: Project Management Techniques Gantt chart provides several useful pieces of information: -

A horizontal bar chart that depicts activities as blocks over time The Gantt chart allows us to see the process steps and their durations, which are called activity times The Gannt chart illustrates the dependence between various process activities A popular tool for scheduling simple projects Enables managers to schedule project activities and then monitor its progress over time by comparing planned progress to actual progress

PERT and CPM: Project Management Techniques PERT and CPM -

Both PERT and CPM consider precedence relationships and interdependencies PERT and CPM differ in that each uses a different estimate of activity times. PERT uses 3 time estimates, but CPM uses 1 time estimate PERT is developed for application in projects where there are uncertainty associated with the nature and duration of activities

Six Steps in PERT & CPM 1. Define the project and prepare the work breakdown structure 2. Develop relationships among the activities – decide which activities must precede and which must follow others 3. Draw the network connecting all of the activities 4. Assign time and/or cost estimates to each activity 5. Compute the longest time path through the network U this is called the critical path 6. Use the network to help plan, schedule, monitor and control the project

Estimating activity times 1. Statistical methods – if the project team has access to data on actual activity times experienced in the past 2. If activity times improves with the number of repetitions, the times can be estimated using learning curves model (Module E) 3. The times for the first-time activities are often associated using managerial opinions on the basis of similar prior experiences

Network Diagram -

Network diagram is a diagram that depicts the relationships between activities, which consist of nodes (circles) and arcs (arrows) Two types of network diagrams: o Activity-on-node (AON)  AON is an approach used to create a network diagram, in which nodes represent activities and arrows represent relationships among activities o Activity-on-Arrow (AOA)  AOA is an approach used to create a network diagram, in which nodes represent relationships among activities and arrows represent activities

Sequence and Parallel Before activities can be included in a network, their relationships to each other must be known. This involves knowing for each activity 1. What activities are its predecessors (ie. Sequence of activities and events)? 2. What activities are its successors (ie. Sequence of activities and events)? 3. What activities can be done at the same time as it (ie. Parallel activities and events)?

A Comparison of AON and AOA Network Conventions Activity-on-Node (AON)

Critical Path

Activity Meaning ‘A’ comes before ‘B’, which comes before ‘C’ ‘A’ and ‘B’ must both be completed before ‘C’ can start ‘B’ and ‘C’ cannot begin until ‘A’ is completed ‘C and ‘D’ cannot begin until both ‘A’ and ‘B’ are completed ‘C’ cannot begin until both ‘A’ and ‘B’ are completed; ;D’ cannot begin until ‘B’ is completed. A dummy activity is introduced in AOA ‘B’ and ‘C’ cannot begin until ‘A’ is completed. ‘D’ cannot begin until both ‘B’ and ‘C’ are completed. A dummy activity is again introduced in AOA

Activity-on-Arrow (AOA)

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A path is sequence of activities between a project’s start and finish The critical path is the sequence of activities between a project’s start and finish that takes the longest time to complete Put differently, the critical path is the shortest time in which the project can be completed The activities on the critical path determine the completion time of the project; that is, if one of the activities on the critical path is delayed, the entire project will be delayed. Any delay in critical path activities delays the project

Identify Paths and the Critical Path Identify paths: 1. 2. 3. 4.

A-B-D-E-G-H-J-K A-B-D-E-G-I-J-K A-C-F-G-H-J-K A-C-F-G-I-J-K

Identify critical path: find the longest connected path through the network 1. 2. 3. 4.

A-B-D-E-G-H-J-K = 4+6+6+14+2+4+2 = 40 A-B-D-E-G-I-J-K = 4+6+6+14+3+4+2 = 41 A-C-F-G-H-J-K = 4+3+5+2+2+4+2 = 22 A-C-F-G-I-J-K = 4+3+5+2+3+4+2 = 23

Perform a Critical Path Analysis Using Slack The earliest start and finish times are obtained as follows: -

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Earliest start (ES) is the earliest time at which an activity can start, assuming all predecessors have been completed o ES is the earliest finish time of the immediate preceding activity o For activities with more than one immediate preceding activities, ES is the latest of the earliest finish times of the immediate preceding activities. That is, if an activity has multiple immediate predecessors, its ES is the maximum of all the EF values of its immediate predecessors Earliest finish (EF) is earliest time at which an activity can be finished. EF of an activity equals its earliest start time plus its estimated durations, t, or EF = ES + t

The latest start and finish times are obtained as follows:

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Latest start (LS) is the latest time at which an activity can start so as to not delay the completion time of the entire project o LS for an activity is the latest start time for the activity following it o For activities with more than one activity immediately following, LF is the earliest of the latest start times of those activities. In other words, if an activity is an immediate predecessor to more than one activity, its LF is the minimum of all LS values of all activities that immediately follow it Latest finish (LF) is the latest time by which an acidity has to be finished so as to not delay the completion time of the entire project. LS for an activity equals its latest finish time minus its estimated duration, t, or LS = LF – t

Calculating Slacks and Identifying Critical Path -

After computing the ES, EF, LS, and LF times for all activities, compute the slack or free time for each activity Activity slack is the maximum length of time that an activity can be delayed without delaying the entire project. Thus, activities on the critical path have zero slack Activity slack is the amount of schedule slippage that can be tolerated for an activity before the entire project will be delayed Activity slack can be calculated in one of the following ways for any activity: Slack = LS – ES Slack = LF – EF

Variability in Activity Times

Three time estimates are required: 1. Optimistic time (a) – if everything goes according to plan. Optimistic time is the shortest time in which the activity can be completed, if everything goes according to plan 2. Pessimistic time (b) – assuming very unfavourable conditions. Pessimistic time is the longest estimated time required to perform the activity 3. Most likely time (m) – most realistic estimate. Most likely time is the probable time required to perform the activity. (i.e. Most realistic estimate)

Expected Time, t, in Weeks: Beta Distribution To estimate the probability of completing a project on schedule, the project manager must first calculate the mean, t, and variance, σ2, of a probability distribution for each activity, in PERT, each activity is treated as if it were a random variable derived form a beta distribution. The mean of the beta distribution is given by: t=

(a+4 m +b) 6

Where: -

a = optimistic time b = pessimistic time m = most likely time

Estimating the Probability of Completion Dates The variance of the beta distribution for each activity is estimated as: σ2 = (

b−a 2 ) 6

Probability of Project Completion The variance of a project is given by: σ2p =

∑ ( Variance acitivties on critical path )

= Units2

Project standard deviation: σp =

Normal Formula

√σ ² =

√ ∑ (Variance acitivties on critical path )

To calculate the probability, first compute the z-value z= -

( Due Date )−( Expected Date of Completion ) pσ

Use standard normal curve table (Appendix I) to obtain probability for the z-value For example, assume the z-value is 1.42 and the probability within the table is 0.9222 o This suggest that there is a 92.22% chance that the project can be finished in x weeks o In EXCEL: =NORMSDIST(1.42) = 0.9222

Negative Z-value (z < 0) -

Because the normal curve is symmetrical and table values are calculated for positive values of z, the area desired is equal to: 1 – (Table Value)

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For example, assume the z-value = -2.17 The z-value of 2.17 in Appendix I is 0.9850 Thus, the area corresponding to a z-value of -2.17 is 0.0150 Therefore, there is a 1.5% chance that the project can be finished in x weeks In EXCEL: =NORMSDIST(-2.17) = 0.0150

Steps in Project Crashing 1. Compute the crash cost per time period. If crash costs are linear over time: Crash Cost/Period =

(Crash Cost−Normal Crash) (Normal Time−Crash Time)

2. Using current activity times, find the critical path and identify the critical activities 3. If there is only one critical path, then select the activity on this critical path that a. Can still be crashed, and b. Has the smallest crash cost per period 4. If there is more than one critical path, then select one activity from each critical path such that a. Each selected activity can still be crashed, and b. The total crash cost of all selected activities is the smallest 5. Update all activity time. If the desired due date has been reached, stop. If not, return to Step 2...