Chapter 9

Project Management
Operations
Operations Management
Management -- 6
6thth Edition
Edition

Roberta Russell & Bernard W. Taylor, III

Beni Asllani
Copyright 2009 John Wiley & Sons, Inc. University of Tennessee at Chattanooga
 Lecture Outline

 Project Planning
 Project Scheduling
 Project Control
 CPM/PERT
 Probabilistic Activity Times
 Microsoft Project
 Project Crashing and Time-Cost
Trade-off
Copyright 2009 John Wiley & Sons, Inc. 9-2
 Project Management Process
 Project
 unique, one-time operational activity or effort

Copyright 2009 John Wiley & Sons, Inc. 9-3

 Project Management Process
(cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-4

 Project Management Process
(cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-5

 Project Elements

 Objective
 Scope
 Contract requirements
 Schedules
 Resources
 Personnel
 Control
 Risk and problem analysis

Copyright 2009 John Wiley & Sons, Inc. 9-6

 Project Team and Project Manager

 Project team
 made up of individuals from various areas and
departments within a company
 Matrix organization
 a team structure with members from functional
areas, depending on skills required
 Project manager
 most important member of project team

Copyright 2009 John Wiley & Sons, Inc. 9-7

 Scope Statement and Work
Breakdown Structure
 Scope statement
 a document that provides an understanding,
justification, and expected result of a project
 Statement of work
 written description of objectives of a project
 Work breakdown structure (WBS)
 breaks down a project into components,
subcomponents, activities, and tasks

Copyright 2009 John Wiley & Sons, Inc. 9-8

 Work Breakdown Structure for Computer Order
Processing System Project

Copyright 2009 John Wiley & Sons, Inc. 9-9

 Responsibility Assignment Matrix
 Organizational
Breakdown
Structure (OBS)

a chart that
shows which
organizational
units are
responsible for
work items
 Responsibility
Assignment
Matrix (RAM)

shows who is
responsible for
work in a
project
Copyright 2009 John Wiley & Sons, Inc. 9-10
 Global and Diversity Issues in
Project Management
 In existing global business environment,
project teams are formed from different
genders, cultures, ethnicities, etc.
 In global projects diversity among team
members can add an extra dimension to
project planning
 Cultural research and communication are
important elements in planning process

Copyright 2009 John Wiley & Sons, Inc. 9-11

 Project Scheduling

 Steps  Techniques
 Define activities  Gantt chart
 Sequence  CPM/PERT
activities  Microsoft Project
 Estimate time
 Develop schedule

Copyright 2009 John Wiley & Sons, Inc. 9-12

 Gantt Chart

 Graph or bar chart with a bar for each

project activity that shows passage of
time
 Provides visual display of project
schedule
 Slack
 amount of time an activity can be delayed
without delaying the project

Copyright 2009 John Wiley & Sons, Inc. 9-13

 Example of Gantt Chart
Month
0 | 2 | 4 | 6 | 8 | 10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials

Build house

Select paint

Select carpet

Finish work

1 3 5 7 9
Month
Copyright 2009 John Wiley & Sons, Inc. 9-14
 Project Control
 Time management
 Cost management
 Quality management
 Performance management

Earned Value Analysis
 a standard procedure for numerically measuring a
project’s progress, forecasting its completion date and
cost and measuring schedule and budget variation
 Communication
 Enterprise project management

Copyright 2009 John Wiley & Sons, Inc. 9-15

 CPM/PERT

 Critical Path Method (CPM)

 DuPont & Remington-Rand (1956)
 Deterministic task times
 Activity-on-node network construction
 Project Evaluation and Review Technique
(PERT)
 US Navy, Booz, Allen & Hamilton
 Multiple task time estimates; probabilistic
 Activity-on-arrow network construction

Copyright 2009 John Wiley & Sons, Inc. 9-16

 Project Network
 Activity-on-node (AON)

nodes represent activities,
and arrows show
precedence relationships Node
 Activity-on-arrow (AOA)

arrows represent activities 1 2 3
and nodes are events for
points in time
 Event
Branch

completion or beginning
of an activity in a project
 Dummy

two or more activities
cannot share same start
and end nodes
Copyright 2009 John Wiley & Sons, Inc. 9-17
 AOA Project Network for
a House

3
Lay Dummy
foundation
2 0 Build Finish
3 1 house work
1 2 4 6 7
Design house Order and 3 1
and obtain receive 1 1
Select Select
financing materials paint carpet
5

Copyright 2009 John Wiley & Sons, Inc. 9-18

 Concurrent Activities

3
Lay foundation Lay
Dummy
foundation
2 0
2 3
1
Order material 2 4
Order material

(a) Incorrect precedence (b) Correct precedence

relationship relationship

Copyright 2009 John Wiley & Sons, Inc. 9-19

 AON Network for House
Building Project
Lay foundations Build house

2 4
Finish work
2 3
7
Start 1 1
3
Design house 6
and obtain
3
1 5 1
financing
1 Select carpet
Order and receive
materials Select paint

Copyright 2009 John Wiley & Sons, Inc. 9-20

 Critical Path
2 4
2 3
7
Start 1 1
3

3 6
1 5 1
1

A: 1-2-4-7
3 + 2 + 3 + 1 = 9 months  Critical path
B: 1-2-5-6-7 
Longest path
3 + 2 + 1 + 1 + 1 = 8 months
C: 1-3-4-7 through a network
3 + 1 + 3 + 1 = 8 months 
Minimum project
D: 1-3-5-6-7 completion time
3 + 1 + 1 + 1 + 1 = 7 months

Copyright 2009 John Wiley & Sons, Inc. 9-21

 Activity Start Times

Start at 5 months

2 4
Finish at 9 months
2 3
7 Finish
Start 1 1
3

3 6
1 5 1
1 Start at 6 months
Start at 3 months

Copyright 2009 John Wiley & Sons, Inc. 9-22

 Node Configuration
Activity number Earliest start

Earliest finish
1 0 3

3 0 3
Latest finish

Activity duration Latest start

Copyright 2009 John Wiley & Sons, Inc. 9-23

 Activity Scheduling

 Earliest start time (ES)

 earliest time an activity can start
 ES = maximum EF of immediate predecessors
 Forward pass
 starts at beginning of CPM/PERT network to
determine earliest activity times
 Earliest finish time (EF)
 earliest time an activity can finish
 earliest start time plus activity time
 EF= ES + t

Copyright 2009 John Wiley & Sons, Inc. 9-24

 Earliest Activity Start and
Finish Times
Lay foundations
Build house
2 3 5
Start
4 5 8
2
3

1 0 3 7 8 9
1 1
Design house
Finish work
and obtain 6 6 7
financing 3 3 4
1
1 5 5 6
Select carpet
Order and receive 1
materials Select pain

Copyright 2009 John Wiley & Sons, Inc. 9-25

 Activity Scheduling (cont.)

 Latest start time (LS)

 Latest time an activity can start without delaying
critical path time
 LS= LF - t
 Latest finish time (LF)
 latest time an activity can be completed without
delaying critical path time
 LF = minimum LS of immediate predecessors
 Backward pass
 Determines latest activity times by starting at the end
of CPM/PERT network and working forward

Copyright 2009 John Wiley & Sons, Inc. 9-26

 Latest Activity Start and
Finish Times
Lay foundations
Build house
2 3 5
Start 4 5 8
2 3 5
3 5 8

1 0 3 7 8 9
1 0 3 1 8 9
Design house
and obtain 6 6 7 Finish work
financing 3 3 4
1 7 8
1 4 5 5 5 6
Select carpet
Order and receive 1 6 7
materials Select pain

Copyright 2009 John Wiley & Sons, Inc. 9-27

 Activity Slack

Activity LS ES LF EF Slack S
*1 0 0 3 3 0
*2 3 3 5 5 0
3 4 3 5 4 1
*4 5 5 8 8 0
5 6 5 7 6 1
6 7 6 8 7 1
*7 8 8 9 9 0
* Critical Path

Copyright 2009 John Wiley & Sons, Inc. 9-28

 Probabilistic Time Estimates
 Beta distribution
 a probability distribution traditionally used in
CPM/PERT
a + 4m + b
Mean (expected time): t=
6
2
b-a
Variance:  =
2
6
where
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate
Copyright 2009 John Wiley & Sons, Inc. 9-29
 Examples of Beta Distributions
P(time)

P(time)
a m t b a t m b
Time Time
P(time)

a m=t b
Time

Copyright 2009 John Wiley & Sons, Inc. 9-30

 Project Network with Probabilistic
Time Estimates: Example
Equipment
installation Equipment testing
and modification
1 4
6,8,10 2,4,12 System Final
training debugging
System 10
development 8
Manual 3,7,11 1,4,7
Start 2 testing Finish
3,6,9
5 11
Position 2,3,4 9 1,10,13
recruiting 2,4,6
Job Training System
3 6 System changeover
1,3,5 3,4,5 testing

Orientation
7
2,2,2

Copyright 2009 John Wiley & Sons, Inc. 9-31

 Activity Time Estimates
TIME ESTIMATES (WKS) MEAN TIME VARIANCE
ACTIVITY a m b t б2
1 6 8 10 8 0.44
2 3 6 9 6 1.00
3 1 3 5 3 0.44
4 2 4 12 5 2.78
5 2 3 4 3 0.11
6 3 4 5 4 0.11
7 2 2 2 2 0.00
8 3 7 11 7 1.78
9 2 4 6 4 0.44
10 1 4 7 4 1.00
11 1 10 13 9 4.00

Copyright 2009 John Wiley & Sons, Inc. 9-32

 Activity Early, Late Times,
and Slack
ACTIVITY t б ES EF LS LF S
1 8 0.44 0 8 1 9 1
2 6 1.00 0 6 0 6 0
3 3 0.44 0 3 2 5 2
4 5 2.78 8 13 16 21 8
5 3 0.11 6 9 6 9 0
6 4 0.11 3 7 5 9 2
7 2 0.00 3 5 14 16 11
8 7 1.78 9 16 9 16 0
9 4 0.44 9 13 12 16 3
10 4 1.00 13 17 21 25 8
11 9 4.00 16 25 16 25 0

Copyright 2009 John Wiley & Sons, Inc. 9-33

 Earliest, Latest, and Slack
8
Critical Path
1 0 4 8 13
8 1 9 5 16 21
10 13 17

16 1 0 3
8 9
Start 2 0 6 Finish
7 9 16
6 0 6 9
5 6 11 16 25
3 6 9 9 9 13
9 16 25
4 12 16
3 0 3 6 3 7
3 2 5 4 5 9

7 3 5
2 14 16

Copyright 2009 John Wiley & Sons, Inc. 9-34

 Total project variance

2 = б22 + б52 + б82 + б112

 = 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks

Copyright 2009 John Wiley & Sons, Inc. 9-35

Copyright 2009 John Wiley & Sons, Inc. 9-36
 Probabilistic Network Analysis
Determine probability that project is
completed within specified time
x-
Z= 
where
 = tp = project mean time
 = project standard deviation
x = proposed project time
Z = number of standard deviations x
is from mean
Copyright 2009 John Wiley & Sons, Inc. 9-37
 Normal Distribution of
Project Time
Probability

Z

 = tp x Time

Copyright 2009 John Wiley & Sons, Inc. 9-38

 Southern Textile Example
What is the probability that the project is completed
within 30 weeks?

P(x  30 weeks)
x-
 2 = 6.89 weeks Z= 
 = 6.89 30 - 25
= 2.62
 = 2.62 weeks
= 1.91
 = 25 x = 30 Time (weeks)

From Table A.1, (appendix A) a Z score of 1.91 corresponds to a

probability of 0.4719. Thus P(30) = 0.4719 + 0.5000 = 0.9719
Copyright 2009 John Wiley & Sons, Inc. 9-39
 Southern Textile Example
What is the probability that the project is completed
within 22 weeks?
x-
P(x  22 weeks)  2 = 6.89 weeks Z= 
 = 6.89 22 - 25
= 2.62
 = 2.62 weeks
= -1.14
x = 22  = 25 Time
(weeks)

From Table A.1 (appendix A) a Z score of -1.14 corresponds to a

probability of 0.3729. Thus P(22) = 0.5000 - 0.3729 = 0.1271

Copyright 2009 John Wiley & Sons, Inc. 9-40

 Microsoft Project

 Popular software package for project

management and CPM/PERT analysis
 Relatively easy to use

Copyright 2009 John Wiley & Sons, Inc. 9-41

 Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-42

 Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-43

 Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-44

 Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-45

 Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-46

 Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-47

 PERT Analysis with
Microsoft Project

Copyright 2009 John Wiley & Sons, Inc. 9-48

 PERT Analysis with
Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-49

 PERT Analysis with
Microsoft Project (cont.)

Copyright 2009 John Wiley & Sons, Inc. 9-50

 Project Crashing

 Crashing
 reducing project time by expending additional
resources
 Crash time
 an amount of time an activity is reduced
 Crash cost
 cost of reducing activity time
 Goal
 reduce project duration at minimum cost

Copyright 2009 John Wiley & Sons, Inc. 9-51

 Project Network for Building
a House

2 4
12
8
7
1 4
12

3 6
4 5 4
4

Copyright 2009 John Wiley & Sons, Inc. 9-52

 Normal Time and Cost
vs. Crash Time and Cost
$7,000 –

$6,000 –
Crash cost

$5,000 – Crashed activity

Slope = crash cost per week

$4,000 –

$3,000 – Normal activity

Normal cost
$2,000 –

$1,000 –
Crash time Normal time
| | | | | | |
–
0 2 4 6 8 10 12 14 Weeks

Copyright 2009 John Wiley & Sons, Inc. 9-53

 Project Crashing: Example

TOTAL
NORMAL CRASH ALLOWABLE CRASH
TIME TIME NORMAL CRASH CRASH TIME COST PER
ACTIVITY (WEEKS) (WEEKS) COST COST (WEEKS) WEEK

1 12 7 $3,000 $5,000 5 $400

2 8 5 2,000 3,500 3 500
3 4 3 4,000 7,000 1 3,000
4 12 9 50,000 71,000 3 7,000
5 4 1 500 1,100 3 200
6 4 1 500 1,100 3 200
7 4 3 15,000 22,000 1 7,000
$75,000 $110,700

Copyright 2009 John Wiley & Sons, Inc. 9-54

 $500 $7000
Project Duration:
2 4
$700
36 weeks
8 12
7
1
12
4 FROM …

$400 3 6
4 5 4
4 $200
$3000
$200

$500 $7000

2 4
8 12 $700
7
1
TO… 7
4

Project Duration: $400 3 6

31 weeks 4 5 4
Additional Cost: 4 $200
$3000
$2000 $200

Copyright 2009 John Wiley & Sons, Inc. 9-55

 Time-Cost Relationship

 Crashing costs increase as project

duration decreases
 Indirect costs increase as project
duration increases
 Reduce project length as long as
crashing costs are less than indirect
costs

Copyright 2009 John Wiley & Sons, Inc. 9-56

 Time-Cost Tradeoff
Minimum cost = optimal project time
Total project cost

Indirect cost
Cost ($)

Direct cost

Crashing Time
Project duration
Copyright 2009 John Wiley & Sons, Inc. 9-57
Copyright 2009 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation
of this work beyond that permitted in section 117
of the 1976 United States Copyright Act without
express permission of the copyright owner is
unlawful. Request for further information should
be addressed to the Permission Department,
John Wiley & Sons, Inc. The purchaser may
make back-up copies for his/her own use only
and not for distribution or resale. The Publisher
assumes no responsibility for errors, omissions,
or damages caused by the use of these
Copyright 2009 John Wiley & Sons, Inc. 9-58