Chapter 17: Learning Objectives

Chapter 17: Learning Objectives

Chapter 17: Learning Objectives You should be able to: 1. Discuss the behavioral aspects of projects in terms of project personnel and the project manager 2. Explain the nature and importance of a work breakdown structure in project management 3. Give a general description of PERT/CPM techniques 4. Construct simple network diagrams 5. List the kinds of information that a PERT or CPM analysis can provide 6. Analyze networks with deterministic times 7. Analyze networks with probabilistic times 8. Describe activity crashing and solve typical problems 17-1 Projects Projects Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame Examples: The Olympic Games Producing a movie

Software development Product development ERP implementation 17-2 Project Life Cycle 17-3 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. 2. 3. Identify the major elements of the project Identify the major supporting activities for each of the major elements

Break down each major supporting activity into a list of the activities that will be needed to accomplish it 17-4 WBS 17-5 Gantt Chart 17-6 PERT and CPM PERT (program evaluation and review technique) and CPM (critical path method) are two techniques used to manage largescale projects By using PERT or CPM Managers can obtain: A graphical display of project activities 2. An estimate of how long the project will take 3. An indication of which activities are most critical to timely project completion

4. An indication of how long any activity can be delayed without delaying the project 1. 17-7 Network Diagram Network diagram 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 Activities Project steps that consume resources and/or time Events The starting and finishing of activities 17-8 AON Convention Activity on Activity Meaning Node (AON)

(a) A C B A comes before B, which comes before C. A (b) C A and B must both be completed before C can start. B B (c) B and C cannot begin until A is completed. A C

17-9 AON Convention Activity on Activity Meaning Node (AON) A C B D A C B D (d) (e)

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. 17-10 AON Convention Activity on Activity Meaning Node (AON) A B (f) C D 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. 17-11 AON Example Project Activities and Predecessors Activity A Description Build internal components Immediate Predecessors B Modify roof and floor C

Construct collection stack A D Pour concrete and install frame A, B E Build high-temperature burner C F Install pollution control system C G Install air pollution device

D, E H Inspect and test F, G 17-12 AON Network A Activity A (Build Internal Components) B Activity B (Modify Roof and Floor) Start Start

Activity 17-13 AON Network Activity A Precedes Activity C A C B D Start Activities A and B Precede Activity D 17-14 AON Network F A

C E Start B D H G Arrows Show Precedence Relationships 17-15 Deterministic Time Estimates Deterministic Time estimates that are fairly certain Probabilistic Time estimates that allow for variation

17-16 Determining Project Duration Activity A B C D E F G H Description Time (weeks) Build internal components 2 Modify roof and floor 3 Construct collection stack 2 Pour concrete and install frame 4 Build high-temperature burner 4

Install pollution control system 3 Install air pollution device 5 Inspect and test 2 Total Time (weeks) 25 17-17 Determining the Project Duration Critical Path Path Path duration A-C-F-H 2+2+3+2=9 A-C-E-G-H 2+2+4+5+2=

15 A-D-G-H 2 + 4 + 5 + 2 = 13 B-D-G-H 3 + 4 + 5 + 2 = 14 Critical path = Longest path A-C-E-G-H Project duration = 15 weeks 17-18 Early Start, Early Finish Finding ES and EF involves a forward pass through the network diagram Early start (ES) The earliest time an activity can start Assumes all preceding activities start as early as possible For nodes with one entering arrow ES = EF of the entering arrow For activities leaving nodes with multiple entering arrows ES = the largest of the largest entering EF

Early finish (EF) The earliest time an activity can finish EF = ES + t 17-19 Late Start, Late Finish Finding LS and LF involves a backward pass through the network diagram Late Start (LS) The latest time the activity can start and not delay the project The latest starting time for each activity is equal to its latest finishing time minus its expected duration: LS = LF - t Late Finish (LF) The latest time the activity can finish and not delay the project For nodes with one leaving arrow, LF for nodes entering that node equals the LS of the leaving arrow For nodes with multiple leaving arrows, LF for arrows entering node equals the smallest of the leaving arrows

17-20 Slack and the Critical Path Slack can be computed one of two ways: Slack = LS ES Slack = LF EF Critical path The critical path is indicated by the activities with zero slack 17-21 Determining the Project Schedule Perform a Critical Path Analysis Activity Name or Symbol A Earliest Start

ES EF Latest Start LS LF 2 Earliest Finish Latest Finish Activity Duration 17-22 Forward Pass Begin at starting event and work forward Earliest Start Time Rule:

If an activity has only a single immediate predecessor, its ES equals the EF of the predecessor If an activity has multiple immediate predecessors, its ES is the maximum of all the EF values of its predecessors ES = Max {EF of all immediate predecessors} 17-23 Forward Pass Begin at starting event and work forward Earliest Finish Time Rule: The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time EF = ES + Activity time 17-24 Forward Pass ES EF = ES + Activity time

0 Start 0 0 17-25 Forward Pass EF of A = ES of A + 2 ES of A 0 Start 0 0 A

2 0 2 17-26 Forward Pass 0 A 2 0 Start 0 0 2

EF of B = ES of B + 3 ES of B 0 B 3 3 17-27 Forward Pass 0 A 2 2

0 Start 2 C 4 2 0 0 0 B 3 3 17-28 Forward Pass

0 A 2 2 0 Start 0 2 C 4 2 = Max (2, 3) 0

D 3 0 B 3 7 3 4 17-29 Forward Pass 0 A 2 2

2 0 Start C 4 2 0 0 0 B 3 3 3 D

7 4 17-30 Forward Pass 0 A 2 2 2 0 Start C 4

4 2 F 7 3 0 4 0 E 8 13 4 0

B 3 3 3 D 4 7 H 15 2 8 G 13 5 17-31

Backward Pass Begin with the last event and work backwards Latest Finish Time Rule: If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity that immediately follows it 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 LF = Min {LS of all immediate following activities} 17-32 Backward Pass Begin with the last event and work backwards Latest Start Time Rule: The latest start time (LS) of an activity is the difference of its latest finish time (LF) and its activity time LS = LF Activity time

17-33 Backward Pass 0 A 2 2 2 0 Start C 4 4 2

F 7 3 0 4 0 E 8 13 13 4 0 B 3

3 LS = LF D Activity time G 3 7 4 8 5 H 2 15 15 13 LF = EF of Project

17-34 Backward Pass 0 A 2 2 2 0 Start C 4 4 10

2 F 3 7 13 E 0 8 of LF =4 Min(LS following activity) 0 13 13 4 0

B 3 3 3 D 4 7 8 G H 2 15 15 13 5

17-35 Backward Pass LF = Min(4, 10) 0 A 2 2 2 0 Start 2 C 2 4

4 4 10 0 4 4 0 0 B 3 3 3 D 4

7 E 4 F 3 7 13 8 13 8 13 8 8 G 5

H 2 15 15 13 13 17-36 Backward Pass 0 0 0 0 Start 0 A 2

2 2 2 2 C 2 4 4 4 10 0 4 0

4 0 1 B 3 3 3 4 4 D 4 E 4 F 3

7 13 8 13 8 13 7 8 8 8 G 5 H 2

15 15 13 13 17-37 Computing Slack Time After computing the ES, EF, LS, and LF times for all activities, compute the slack or free time for each activity Slack is the length of time an activity can be delayed without delaying the entire project Slack = LS ES or Slack = LF EF 17-38 Computing Slack Time Earliest Earliest

Start Finish Activity ES EF A B C D E F G H 0 0 2 3 4 4 8 13 2

3 4 7 8 7 13 15 Latest Start LS Latest Finish LF Slack LS ES On Critical Path 0 1

2 4 4 10 8 13 2 4 4 8 8 13 13 15 0 1 0 1 0 6 0 0

Yes No Yes No Yes No Yes Yes 17-39 Using Slack Times Knowledge of slack times provides managers with information for planning allocation of scarce resources Control efforts will be directed toward those activities that might be most susceptible to delaying the project Activity slack times are based on the assumption that all of the activities on the same path will be started as early as possible and not exceed their expected time If two activities are on the same path and have the same slack, this will be the total slack available to both

17-40 Probabilistic Time Estimates The beta distribution is generally used to describe the inherent variability in time estimates The probabilistic approach involves three time estimates: Optimistic time, (to) The length of time required under optimal conditions Pessimistic time, (tp) The length of time required under the worst conditions Most likely time, (tm) The most probable length of time required 17-41 Probabilistic Time Estimates The expected time, te ,for an activity is a weighted average of the three time estimates:

to 4t m t p te 6 The expected duration of a path is equal to the sum the times of the Path meanof of expected expected times of activities on the path activities on that path: 17-42 Determining Path Probabilities

z Specified time - Path mean Path standard deviation 17-43 Project Completion Time A project is not complete until all project activities are complete It is risky to only consider the critical path when assessing the probability of completing a project within a specified time. To determine the probability of completing the project within a particular time frame Calculate the probability that each path in the project will be completed within the specified time Multiply these probabilities The result is the probability that the project will be completed

within the specified time 17-44 Probabilistic Time Estimates The standard deviation of each activitys time is estimated as one-sixth of the difference between the pessimistic and optimistic time estimates. The variance is the square of the standard deviation: 2 t p t o 6 2 Standard deviation of the expected time for the path

path Variances of activities on path 17-45 Computing Variance Optimistic Activity to A B C D E F G H 1 2 1 2 1

1 3 1 Most Likely tm 2 3 2 4 4 2 4 2 Pessimistic Expected Time Variance tp

t = (to + 4 tm + tp)/6 [(tp to)/6]2 3 4 3 6 7 9 11 3 2 3 2 4 4 3 5 2 4/36 4/36

4/36 16/36 36/36 64/36 64/36 4/36 17-46 Knowledge of Path Statistics Knowledge of expected path times and their standard deviations enables managers to compute probabilistic estimates about project completion such as: The probability that the project will be completed by a certain time The probability that the project will take longer than its expected completion time 17-47 Computing Variance Path variance is computed by summing the variances of

activities on the path 2 =pProject variance = (variances of activities on the path) 17-48 Computing Variance Variance of critical path 2 =p 4/36 + 4/36 + 36/36 + 64/36 + 4/36 = 112/36 = 3.1111 Standard deviation of critical path p = = Variance of critical path 3.1111 = 1.7638 weeks 17-49 Probability of Project Completion Note: Total project completion times follow a normal probability distribution Activity times are statistically

independent 17-50 Probability of Project Completion Standard deviation = 1.7638 weeks 15 Weeks (Expected Completion Time) 17-51 Probability of Project Completion What is the probability this project can be completed on or before the 16 week deadline? Z= T - TM p TM = Path mean completion time T = Due date Z = (16 15)/1.7638 = 0.57

Where Z is the number of standard deviations the due date or target date lies from the mean or expected date 17-52 Probability of Project Completion Probability (T 16 weeks) is 0.7157 0.57 Standard deviations Probability (T > 16 weeks) is 1 0.7157 = 0.2843 15 Weeks

16 Weeks Time 17-53 Project Completion for given confidence Determine a due date for the project completion time that will have a 99% probability of meeting. Due date = TE + Z p 17-54 Determining Project Completion Time Probability of 0.99 Probability of 0.01 From Appendix I

0 2.325 Standard deviations Z 2.325 17-55 Determining Project Completion Time Probability of 0.99 Due date (T) = TM + z p Probability of 0.01 From Appendix I 0 2.325 Standard

deviations Z 2.325 17-56 Determining Project Completion Time Due date (T) = 15 + 2.325 (1.7638) Probability of 0.99 Probability of 0.01 From Appendix I 0 2.325 Standard deviations Z 2.325

17-57 Determining Project Completion Time Due date (T) = 19.1 weeks Probability of 0.99 Probability of 0.01 From Appendix I 0 2.325 Standard deviations Z 2.325 17-58 Variability of Completion Time for Noncritical Paths Variability of times for activities on

noncritical paths must be considered when finding the probability of finishing in a specified time Variation in noncritical activity may cause change in critical path 17-59 What Project Management Has Provided So Far 1. The projects expected completion time is 15 weeks 2. There is a 71.57% chance the equipment will be in place by the 16 week deadline 3. Five activities (A, C, E, G, and H) are on the critical path 4. Three activities (B, D, F) are not on the critical path and have slack time 17-60

Budget Control Budget control is an important aspect of project management Costs can exceed budget Overly optimistic time estimates Unforeseen events Unless corrective action is taken, serious cost overruns can occur 17-61 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

17-62 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, thereby realizing savings in indirect project costs 17-63 Crashing Decisions To make decisions concerning crashing requires information about: 1. Regular time and crash time estimates for each activity 2. Regular cost and crash cost estimates for each activity 3. 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 17-64 Crashing: Procedure General procedure: 1. Crash the project one period at a time 2. Crash the least expensive activity that is on the critical path 3. 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 17-65 Crashing Activities 17-66 PERT: Advantages Among the most useful features of PERT: 1.It forces the manager to organize and quantify available information and to identify where additional information is needed 2.It provides the a graphic display of the project and its major activities 3.It identifies a. Activities that should be closely watched b. Activities that have slack time

17-67 Sources of Error Potential sources of error: 1. The project network may be incomplete 2. Precedence relationships may not be correctly expressed 3. Time estimates may be inaccurate 4. There may be a tendency to focus on critical path activities to the exclusion of other important project activities 5. Major risk events may not be on the critical path 17-68 Project Management Software Technology has benefited project management CAD To produce updated prototypes on construction and productdevelopment projects Communication software Helps to keep project members in close contact Facilitates remote viewing of projects Project management software Specialized software used to help manage projects Assign resources

Compare project plan versions Evaluate changes Track performance 17-69 Project Management Software Advantages Advantages include: Imposes a methodology and common project management terminology Provides a logical planning structure May enhance communication among team members Can flag the occurrence of constraint violations Automatically formats reports Can generate multiple levels of summary and detail reports Enables what if scenarios Can generate a variety of chart types 17-70 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 17-71 Operations Strategy Projects present both strategic opportunities and risks It is critical to devote sufficient resources and attention to projects Projects are often employed in situations that are characterized by significant uncertainties that demand Careful planning Wise selection of project manager and team Monitoring of the project Project software can facilitate successful project completion Be careful to not focus on critical path activities

to the exclusion of other activities that may become critical It is not uncommon for projects to fail When that happens, it can be beneficial to examine the probable reasons for failure 17-72

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