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Project Management
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 What is a project?
OPERATIONS MANAGEMENT  A series of related jobs, usually directed toward some major output and requiring
LECTURE -2 a significant period of time to perform.
 What is project management?
 Planning, directing, and controlling resources (people, equipment, material) to meet
PROJECTS the technical, cost, and time constraints of a project.
 Why is project management important?
 At the highest levels of an organization, management often involves juggling a
portfolio of projects.

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Network-Planning Models Critical Path Method (CPM)

• A project is made up of a sequence of activities that form a • Identify each activity to be done and estimate how long it
network, representing the project. will take to complete it.
• The path taking longest time through this network of activities • Determine the required sequence of activities and construct
is called the “critical path”. a network diagram reflecting the precedence relationships.
• The critical path provides a wide range of scheduling • Determine the critical path.
information useful in managing a project. • Determine the early start/finish and late start/finish
• Critical path method (C P M) helps to identify the critical schedule.
path(s) in the project networks.
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 PERT / CPM PERT / CPM
PERT
 PERT/CPM is used to plan the scheduling of individual activities
¤ Program Evaluation and Review Technique
¤ Developed by U.S. Navy for Polaris missile project
that make up a project
¤ Developed to handle uncertain activity times  Projects may have as many as several thousand activities

CPM  A complicating factor in carrying out the activities is that some

¤ Critical Path Method activities depend on the completion of other activities before
¤ Developed by Du Pont & Remington Rand
they can be started
¤ Developed for industrial projects for which activity times
generally were known
Today’s project management software packages have combined the best features of both
approaches
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PERT / CPM Project Network

Project managers rely on PERT/CPM to help them answer questions such as:  A project network can be constructed to model the precedence of the
 What is the total time to complete the project? activities
 What are the scheduled start and finish dates for each specific activity?  The nodes of the network represent the activities
 Which activities are critical and must be completed exactly as scheduled  The arcs of the network reflect the precedence relationships of the
to keep the project on schedule? activities
 How long can noncritical activities be delayed before they cause an  A critical path for the network is a path consisting of activities with zero
increase in the project completion time? slack – OR it is the longest path from start to finish of the project

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 Key Technical Terms Key Technical Terms (Cont.)
 Immediate predecessor: Activity that needs to be completed  Early start time: the maximum of the earliest finish times of all
immediately before another activity. activities immediately preceding activity i. (This is 0 for an
activity with no predecessors.)
 Critical path: The longest path through a network; it is the minimum  Early finish time: (Early Start Time) + (Time to complete activity i ).

project completion time.  Late finish time: the latest time an activity may be completed
without increasing the project completion time.
 Late start time: (Late Finish Time) - (Time to complete activity i ).
 Slack time: The time that an activity can be delayed; the difference
The latest time an activity may begin without increasing the
between the late and early start times of an activity. project completion time.
5 - 10 5 - 11

Nodes Precedence Relationships – Example

OR

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 Slack Time – Example Critical Path Method – Example 5.2

 The time that an activity can be delayed without delaying the entire  Activity identification, sequencing, and network identification
project: the difference between the late and early start times of an
activity

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Critical Path Method – Example 5.2 Example 1: CPM with Single Time Estimate

 Critical path determination: determine early start/early finish and late

start/late finish schedule Consider the following consulting project:
Description Activity Immed. Pred. Time (Weeks)
Assess customer's needs A None 2
Critical
Write and submit proposal B A 1
Path 1:
ACFG Obtain approval C B 1
Develop service vision and goals D C 2
Train employees E C 5
Critical
Path 2: Quality improvement pilot groups F D, E 5
ABDFG Write assessment report G F 1

Develop a critical path diagram and determine the duration of the critical
path and slack times for all activities.
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 Example 1: CPM with Single Time Estimate Critical Path Method with Activity Time Estimates

 When activity times vary, a single time estimate may not be reliable
Instead, estimate three values
Optimistic time = the minimum activity time
Most likely time = the most probable activity time
Pessimistic time = the maximum activity time

Critical Path : ABCEFG

 This allows calculation of a probability estimate of completion time
Duration of Project : 15 weeks  This is the distinguishing characteristic of the PERT method

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Uncertain Activity Times Uncertain Activity Times

 For new or unique projects, estimating time for each activity are uncertain
in many cases.  In the three-time estimate approach, the critical path is
 The uncertain activity times are treated as random variables with determined as if the mean times for the activities were fixed
associated probability distribution (Beta-distribution). times.
 The mean and variance can be approximated with three-time estimates.
 The beta distribution is a continuous distribution, but it has no  The overall project completion time is assumed to have a normal
predetermined shape. distribution with mean equal to the sum of the means along the
 To incorporate uncertain activity times into analysis, we need to get three- critical path and variance equal to the sum of the variances
time estimates for each activity:
 Optimistic time = the minimum activity time along the critical path.
 Most possible time = the most probable activity time
 Pessimistic time = the maximum activity time

5 - 20 5 - 21
 PERT Method Calculations - Formulas PERT Method Calculations – Example 5.3

𝟐
𝟐

 a – Optimistic time: the minimum reasonable period of time

in which the activity can be completed
 b – Pessimistic time: the maximum reasonable period of
time the activity would take to be completed
 m - Most likely time: the best guess of the time required
 ET - Expected time for activity
 - Variance of activity times 𝑏−𝑎
=
9−7 1= 9
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PERT Method Calculations – Example 5.3 PERT Method Calculations – Example 5.3
 Probability of finishing in 35 weeks (or less)

𝟐
𝑬𝑷

= 9 + 2.7778 + 0.1111 + 0 = 11.8889

 Z value of -0.87 yields a probability of 0.1922
 Probability of finishing in 35 weeks (or less) is about 19.22%
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 CPM Exercise: Frank’s Fine Floats

Frank’s Fine Floats is in the business of building elaborate parade

floats. Frank and his crew have a new float to build and want to use
Project Scheduling to help them manage the project .
The table on the next slide shows the activities that comprise the
project. Each activity’s estimated completion time (in days) and
immediate predecessors are listed as well.
Frank wants to know the total time to complete the project, which
activities are critical, and the earliest and latest start and finish dates for
each activity.

5 - 26 (QMII, inst.slides) 5 - 27

CPM Exercise: Frank’s Fine Floats PERT Exercise

Immediate Completion  Given the following network and activity time estimates, determine the
Activity Description Predecessors Time (days) expected project completion time and variance, and the probability that
A Initial Paperwork --- 3 the project will be completed in 28 days or less.
B Build Body A 3
C Build Frame A 2 Immed. a. Optimistic b. Most Likely c. Pessimistic
Activity Predec. Time (Hr.) Time (Hr.) Time (Hr.)
D Finish Body B 3 1 -- 5 8 17
2 -- 7 10 13
E Finish Frame C 7 3 1 3 5 7
F Final Paperwork B,C 3 4 1 1 3 5
5 2, 3 4 6 8
G Mount Body to Frame D,E 6 6 2, 3 3 3 3
H Install Skirt on Frame C 2 7 4, 5 3 4 5

(QMII, inst. slides)

5 - 28 5 - 29
 5 - 30 5 - 31

Time-Cost Models and Project Crashing Project Crashing: Time-Cost Models

 A time-cost model – Extension of the critical path models that  The project manager often must finish the project sooner than
considers the trade-off between the time required to complete an indicated by the Critical Path Method.
activity and the cost  The manager can reduce a project completion by adding

 Considers direct activity costs, indirect costs of project, and activity resources (material, equipment, and so on) to selected
completion times activities.
 An attempt to develop a minimum-cost schedule for entire project  However, added resources (e.g. more workers, overtime, and

 Project crashing – The compression of the time to complete project so on) generally increase project costs.
often referred to as “crashing” the project to reduce overall duration  Thus, the decision to reduce the project duration is based

on an analysis of the tradeoff between time and cost.

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 Project Crashing Technical Terms

 The goal of crashing is to reduce project duration at minimum  Normal Time (NT) is the time necessary to complete an activity under
cost. normal conditions

 Time-Cost Models  Normal Cost (NC) is the activity cost associated with the normal time
Used when cost trade-off information is a major
consideration in planning  Crash Time (CT) is the shortest possible time to complete an activity
Used to determine the least cost in reducing total project
time  Crash Cost (CC) is the activity cost associated with the crash time.
5 - 34 5 - 35

Project Crashing Project Crashing – Example

1. Prepare a C P M-type network diagram.  Step 1: The diagram should list:

 Normal cost (NC) – the lowest expected activity cost
2. Determine the cost per unit of time to expedite each activity.  Normal time (NT) – the time associated with each normal cost

3. Compute the critical path.  Crash time (CT) – the shortest possible activity time
 Crash cost (CC) – the cost associated with each crash time
4. Shorten the critical path/s at the least cost by one unit time and
repeat this step until time of project completion is satisfactory.  Step 2:

5. Plot project, indirect, and total cost curves to find the minimum- 𝑪𝒐𝒔𝒕 𝒑𝒆𝒓 𝒖𝒏𝒊𝒕 𝒕𝒊𝒎𝒆 =
𝑪𝑪 − 𝑵𝑪
𝑵𝑻 − 𝑪𝑻
cost schedule.

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 Project Crashing Project Crashing – Example
 Step 2 (continued): Calculate cost per day to expedite each activity

 Step 3: Compute critical path

𝐶𝐶 − 𝑁𝐶  The critical path is A-B-D
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 𝑡𝑖𝑚𝑒 =
𝑁𝑇 − 𝐶𝑇
 The schedule will take 10 days

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Project Crashing – Example Project Crashing – Example

 Step 4: Reduce the project completion time one day at a time  Step 5: Plot cost curves and find minimum cost schedule
Minimum total cost
occurs with 8 day
Activity D cannot be duration, which is $40
reduced any further ($30 direct + $10
at this point indirect)

Activity A cannot be
reduced any further
at this point

Activity C cannot be
reduced any further
at this point Crash B and C together to Project has reached
reduce both critical paths minimum duration

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 Crashing Exercise 1
Project Management Information Systems

 Over 100 companies offer project management software  Office Automation, Inc., developed a proposal for introducing a new computerized office system that will
improve processing and interoffice communications for a particular company. Contained in the proposal is a
 Microsoft Project is popular for managing mid-size projects list of activities that must be achieved to complete the new office system project. The time unit is week.
 Oracle’s Primavera Project Planner is often used for very large projects
 In addition to scheduling tasks, resources must also be assigned to specific tasks Activity Immediate Normal Crash Normal Crash

through software tools Predecessor Time Time Cost Cost

 Software can be used to spot over-allocation of resources A None 9 8 7,000 10,000

B A 8 5 9,500 20,000
 Planned use exceeds available supply
C A 15 10 10,000 30,000
 When resources are over-allocated, either more resources are required or rescheduling is D B, C 5 3 1,000 5,000
necessary E C 10 9 37,500 40,000
 Taking advantage of task slack can free resources F D, E 2 1 15,000 20,000
 Progress tracking is a key feature for managing projects as they are being completed
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Crashing Exercise 1 (cont…)

(1) Show the critical path(s) under the normal activity

completion times.
(2) To reduce the project completion time by 1 week, which
activities should be crashed?
(3) To shorten the project completion time by 3 weeks, which
activities would be shortened and what would be the
final total project costs be? Show, step by step, how you
arrive at the schedule.
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 Crashing Exercise 2

A project has been defined to contain the following list of

activities, along with their normal time (weeks), crash time (weeks), normal costs ($000), and
crash costs ($000).
Activity Immediate Normal Crash Normal Crash
Predecessor Time Time Cost Cost

A None 2 1 6 10

B A 5 2 9 18

C A 4 3 6 8

D B, C 3 1 5 9
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Crashing Exercise 3
Crashing Exercise 2 (cont…)
A project has been defined to contain the following list of
1. What is the normal project length? activities, along with their normal time (weeks), crash time (weeks), normal costs ($000),
and crash costs ($000).
2. To reduce the project completion time by 1 week, which
Activity Immediate Normal Normal Crash Crash
activities should be crashed? Predecessor Time Cost Time Cost
3. To reduce the project completion time by 5 weeks, which A None 5 7 3 13
activities should be crashed and by how many weeks B A 10 12 7 18
C A 8 5 7 7
should these crashed activities be crashed? D B 6 4 5 5
E C 7 3 6 6
F C 4 6 3 7
G D, E, F 4 7 3 9
5 - 48 5 - 49
 Crashing Exercise 3 (cont…)

1. What is the normal project length?

2. To reduce the project completion time by 1 week, which
activities should be crashed?
3. Suppose that you would like to reduce the project
completion time by three weeks. Show, step by step, how
you arrive at your schedule. What would the final total
project costs be? Show also the critical path(s) after
reducing the project completion time by three weeks.
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