CHAPTER 14:

PROJECT
MANAGEMENT
Presented by:
Pili, Andrea Jessa Mae
Diamzon, Trizzia Kate
Manalungsung, Newton
De Leon, Shaira
LEARNING OBJECTIVES
After studying this chapter, you should be able to:

14.1 Explain the key issues associated with projects

14.2 Describe how to apply the Critical Path Method

(CPM)

14.3 Explain how to make time/cost trade-off

decisions in projects

14.4 Describe how to calculate probabilities for

project completion time using the Project
Evaluation and Review Technique (PERT)
Page 08

PROJECT
A project is a temporary and often
customized initiative that consists of
many smaller tasks and activities that
must be coordinated and completed to
finish the entire initiative on time and
within budget.
PROJECT MANAGEMENT
Involves all activities associated
with planning, scheduling, and
controlling projects
 EXAMPLE PROJECTS IN DIFFERENT FUNCTIONAL
AREAS THAT IMPACT THE VALUE CHAIN
FUNCTIONAL AREAS EXAMPLE PROJECTS
Marketing -Point-of-sale system installation, New product introduction,
Market research studies.
Accounting and Finance -Auditing a firm's accounting and financial systems, Planning a
firm's initial public offering (IPO), Auditing a firm's procedures
and stock trading rules for compliance with the Securities &
Exchange Commission.
Information Systems -Software development, Software upgrades throughout a firm,
Hardware installation.
Human Resource Management -Launching and coordinating training programs, Annual
performance and compensation review, Implementing new
benefits plans.
Engineering -Designing new manufactured parts, Implementing new computer-
aided design system, Installing factory automation.
Logistics
-Installing an automated warehouse system, Implementing an
order-tracking system, Building a transportation hub.
Operations -Planning preventive maintenance for an oil refinery,
Implementing enterprise resource planning (ERP) software and
PROJECT LIFE CYCLE STAGES
Define Plan Organize
Define the steps needed to execute a Forming a team, allocating
Clearly define its goal, its project, determine who will perform resources, calculating costs,
responsibilities and deliverables, and these steps, and the start and assessing risk, preparing project
when it must be accomplished. A completion dates are developed. documentation, and ensuring
common way to capture this Planning entails breaking down a project good communications. It also
information is with a specific and into smaller activities and developing a requires identifying a project
measurable statement of work. project schedule by estimating the time manager who provides the
required for each activity and scheduling leadership to accomplish the
them so they meet the project due date. project goal.

Control Close
Assess how well a project meets its
Compiling statistics, releasing and/or
goals and objectives and makes
reassigning people, and preparing a
adjustments as necessary. Controlling
"lessons learned" list.
involves collecting and assessing status
reports, managing changes to baselines,
and responding to circumstances that
can negatively impact the project
participants.
 ROLE OF THE PROJECT MANGERS AND TEAM
MEMBERS
Project managers have significant responsibilities. It is their job to build an
effective team, motivate them, provide advice and support, align the project
with the firm's strategy, and direct and supervise the conduct of the project
from beginning to end. In addition to managing the project, they must
manage the relationships among the project team, the parent organization,
and the client. The project manager must also have sufficient technical
expertise to resolve disputes among functional specialists. - Good project
managers recognize that people issues are as important as technical issues.
Principles for success:
- Manage people individually and as a project team.
- Reinforce the commitment and excitement of the project team.
- Keep everyone informed.
- Build agreements and consensus among the team.
- Empower the project team.
 ORGANIZATIONAL STRUCTURE

Pure project Pure functional Matrix organizational

organizational structure organizational structure structure
Team members are Charters projects exclusively "Lends" resources to projects
assigned exclusively to within functional departments, while still maintaining control
projects and report only to such as manufacturing or research over them. Project managers
the project manager. and development. Advantage: coordinate the work across the
allows team members to work on
Advantage: easier to functions. Advantage:
different projects simultaneously
manage projects because and provides a "home" for the
minimizes duplication of
project teams can be project. Disadvantage: ignores an resources and facilitates
designed for efficiency by important reality: in a typical communication across the
including the right mix of functional organization, a project organization. Disadvantage:
skills. Disadvantage: cuts across organizational requires that resources be
inefficiencies because of boundaries, making negotiated and functional
duplication of resources communication across the managers may be reluctant to
across the organization. organization difficult and can limit provide them.
the effectiveness of projects that
require a systems perspective.
 THE PENALTIES OF POOR PROJECT MANAGEMENT
Not completing projects on time can have severe consequences. For
example, the construction of the Matlacha Bridge in Florida was
finished 10 months later than its original project schedule indicated. The
contract calls for penalties of over $8,000 per day. This shows just how
important all steps of project management are, from defining the
project, its scope, its budget, and possible penalties, through planning,
execution, and control.
 TECHNIQUES FOR PLANNING, SCHEDULING, AND
CONTROLLING PROJECTS
All project management decisions involve three factors: time, resources,
and cost. Key steps involved:
1. Project definition: Identifying the activities that must be completed
and the sequence required to perform them.
2. Resource planning: For each activity, determining the resource needs:
personnel, time, money, equipment, materials, and so on.
3. Project scheduling: Specifying a time schedule for the completion of
each activity.
4. Project control: Establishing the proper controls for determining
progress and developing alternative plans in anticipation of problems in
meeting the planned schedule.
 PROJECT DEFINITION
-Project objective: A clear statement of what the project is to achieve.
- Deliverables: The tangible and intangible outputs of the project.
- Activities: Discrete tasks that consume resources and time.
- Immediate predecessors: Activities that must be completed
immediately before an activity may start.
- Work breakdown structure: A hierarchical tree of end items that will
be accomplished by the project team during the project. It allows
project teams to drill down to the appropriate level of detail in defining
activities.
- Project network: A graphical representation of the activities and their
sequence. It consists of nodes (representing activities) and arcs (defining
precedence relationships between activities), also known as an activity-
on-node (AON) network representation.
 RESOURCE PLANNING
- Includes developing time estimates for performing each activity, other
resources that may be required, such as people and equipment, and a
realistic budget.
- Activity times can be estimated from historical data of similar work
tasks or by the judgment and experience of managers and employees
who perform the tasks.
- Cost control is a vital part of project management, which requires
good budgeting, which in turn first requires estimating the costs of
completing the activities.
 CRITICAL PATH METHOD

-IT IS A PROJECT MANAGEMENT TECHNIQUE USED TO PLAN,

SCHEDULE, CONTROL TASKS IN A PROJECT.

-IT IS THE LONGEST PATH ACTIVITIES FROM THE START TO

FINISH
 KEY CONCEPT

ACTIVITY: TASK
DURATION: TIME TO COMPLETE
PREDECESSOR: TASK BEFORE ANOTHER
SLACK: DELAY ALLOWANCE
 FORWARD PASS

[Link] START

THE EARLIEST TIME AN ACTIVITY BEGINS

ES=MAX(EF OF PEDECESSORS)

[Link] FINISH

EF=ES + DURATION
 FORWARD PASS

ACTIVITY PREDECESSOR DURATION ES EF

A - 3 0 3

B A 2 3 5

C A 4 3 7

D B,C 1 7 8

:
 BACKWARD PASS

[Link] FINISH (LF)

THE LATEST TIME AN ACTIVITY CAN FINISH
WITHOUT DELAYING THE PROJECT.
LF= MINIMUM LS OF ALL IMMEDIATE
SUCCESSORS

[Link] START(LS)
THE LATEST TIME AN ACTIVITY CAN START
WITHOUT DELAYING THE PROJECT.
LS=LF - ACTIVITY DURATION
 BACKWARD PASS

ACTIVITY PREDECESSOR DURATION LS LF

A - 3 0 3

B 3 2 5 7

C 2 1 3 7

D 1 4 7 8
 SLACK

IS THE AMOUNT OF TIME AN ACTIVITY CAN

BE DELAYED WITHOUT DELAYING THE
OVERALL PROJECT.

IF THE SLACK IS = 0 THE ACTIVITY IS

CRITICAL.

IF THE SLACK IS GREATER THAN 0 , THE

ACTIVITY CAN BE DELAYED

FORMULA: ES -FS
 TIME COST TRADE OFF

IS THE PROCESS OF REDUCING THE PROJECT DURATION BY

INCREASING THE PROJECT COST.

FORMULA:

CRASH COST PER UNIT

=CRASH COST- NORMAL COST/NORMAL TIME-CRASH TIME
 TIME COST TRADE OFF

ACTIVITY NORMAL TIME CRASH TIME NORMAL COST CRASH COST

A 5 3 1000 1600

B 4 2 1200 1800

C 6 4 1500 2100

D 8 6 1700 2200
 CRASHING COST PER UNIT OF TIME
Calculated as

(Crash Cost – Normal Cost) ÷ (Normal Time – Crash Time)

. This tells you how much extra you pay to save one unit of time.
 CRASHING AN ACTIVITY

refers to reducing normal time, possibly up to its limit, the crash time

example: ABC company operates from its normal time of 3 weeks

down to 1 week or anywhere in between
 EXAMPLE
Given:

crash cost = 2,000

normal cost = 1,200
normal time = 3 weeks
crash time = 1 week

crash cost per unit of time =

(Crash Cost – Normal Cost)

÷
(Normal Time – Crash Time)
 EXAMPLE PROBLEM
client asks Wildcat Software Consulting Inc.

1. first, how much it would cost to complete the project for 20 weeks
instead of 22 weeks.

2. how much it would cost to finish the project in the fastest possible
time.
 EQUATION 14.1
given crash cost per unit of time:

A = 400 per week

B = 500 per week
C = 250 per week Activities F, H, J, K cannot be crashed.
D = 50 per week
E = 1,200 per week
G = 1,100 per week
I = 1,000 per week
 UNCERTAINTY IN PROJECT MANAGEMENT

PERT - Project Evaluation and Review Technique

introduced in the late 1950s specifically for planning, scheduling,

and controlling the Polaris missile project.
 THREE TIME ESTIMATES

1. Optimistic (a): Ideal scenario completion time.

2. Most probable (m): Likeliest time under normal conditions.

3. Pessimistic (b): Time with significant delays/breakdowns.

 EXPECTED TIME AND VARIANCE

Expected time = (a + 4m + b)/6

variance = (b - a)²/36
 STANDARD DEVIATION

formula=_/ total variance

(square root of the total variance)

 Z - VALUE

(deadline - expected date of

completion)
÷
standard deviation
PERT - PROGRAM EVALUATION AND REVIEW TECHNIQUE

a. What is the expected completion time and

variance for the project?

b. What is the probability that the project will meet

a 12-day deadline? What about the probability for a
15-day deadline?
STANDARD NORMAL DISTRIBUTION
Z-SCORE TABLE
THANK YOU!!