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McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
17
17
Project
Management

17-2
Learning Objectives
Learning Objectives
 Discuss the behavioral aspects of projects
in terms of project personnel and the
project manager.
 Discuss the nature and importance of a
work breakdown structure in project
management.
 Give a general description of PERT/CPM
techniques.
 Construct simple network diagrams.

17-3
Learning Objectives
Learning Objectives
 List the kinds of information that a PERT or
CPM analysis can provide.
 Analyze networks with deterministic times.
 Analyze networks with probabilistic times.
 Describe activity “crashing” and solve
typical problems.

17-4
Unique, one-time operations designed to
Unique, one-time operations designed to
accomplish a specific set of objectives in a limited
accomplish a specific set of objectives in a limited
time frame.
time frame.
Build A
A Done
Build B
B Done
Build C
C Done
Build D
Ship
JAN FEB MAR APR MAY JUN
On time!
Projects
Projects

17-5
Project Management
Project Management
 How is it different?
 Limited time frame
 Narrow focus, specific objectives
 Less bureaucratic
 Why is it used?
 Special needs
 Pressures for new or improves products or
services

17-6
Project Management
Project Management
 What are the Key Metrics
 Time
 Cost
 Performance objectives
 What are the Key Success Factors?
 Top-down commitment
 Having a capable project manager
 Having time to plan
 Careful tracking and control
 Good communications

17-7
Project Management
Project Management
 What are the Major Administrative
Issues?
 Executive responsibilities
 Project selection
 Project manager selection
 Organizational structure
 Organizational alternatives
 Manage within functional unit
 Assign a coordinator
 Use a matrix organization with a project leader

17-8
Project Management
Project Management
 What are the tools?
 Work breakdown structure
 Network diagram
 Gantt charts
 Risk management

17-9
Planning and Scheduling
Planning and Scheduling
MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Locate new
facilities
Interview staff
Hire and train staff
Select and order
furniture
Remodel and install
phones
Move in/startup
Gantt Chart

17-10
 Deciding which projects to implement
 Selecting a project manager
 Selecting a project team
 Planning and designing the project
 Managing and controlling project resources
 Deciding if and when a project should be
terminated
Key Decisions
Key Decisions

17-11
Project Manager
Project Manager
Responsible for:
Work Quality
Human Resources Time
Communications Costs

17-12
 Temptation to understate costs
 Withhold information
 Misleading status reports
 Falsifying records
 Comprising workers’ safety
 Approving substandard work
Ethical Issues
Ethical Issues

17-13
Project Life Cycle
Project Life Cycle
Concept
Feasibility
Planning
Execution
Termination
Management

17-14
Work Breakdown Structure
Work Breakdown Structure
Project X
Level 1
Level 2
Level 3
Level 4
Figure 17.2

17-15
PERT and CPM
PERT and CPM
PERT: Program Evaluation and
Review Technique
CPM: Critical Path Method
 Graphically displays project activities
 Estimates how long the project will take
 Indicates most critical activities
 Show where delays will not affect project

17-16
The Network Diagram
The Network Diagram
 Network (precedence) diagram – diagram of
project activities that shows sequential
relationships by the use of arrows and nodes.
 Activity-on-arrow (AOA) – a network diagram
convention in which arrows designate activities.
 Activity-on-node (AON) – a network diagram
convention in which nodes designate activities.
 Activities – steps in the project that consume
resources and/or time.
 Events – the starting and finishing of activities,
designated by nodes in the AOA convention.

17-17
The Network Diagram (cont’d)
The Network Diagram (cont’d)
 Path
 Sequence of activities that leads from the starting
node to the finishing node
 Critical path
 The longest path; determines expected project
duration
 Critical activities
 Activities on the critical path
 Slack
 Allowable slippage for path; the difference the
length of path and the length of critical path

17-18
Project Network – Activity on
Arrow
Arrow
1
2
3
4
5 6
Locate
facilities
Order
furniture
Furniture
setup
Interview
Hire and
train
Remodel
Move
in
Figure 17.4
AOA

17-19
Node
Node
1
2
3
5
6
Locate
facilities
Order
furniture
Furniture
setup
Interview
Remodel
Move
in
4
Hire and
train
7
S
Figure 17.4
AON

17-20
Network Conventions
Network Conventions
a
b
c a
b
c
a
b
c
d
a
b
c
Dummy
activity

17-21
Time Estimates
Time Estimates
 Deterministic
 Time estimates that are fairly certain
 Probabilistic
 Estimates of times that allow for variation

17-22
Example 1
Example 1
1
2
3
4
5 6
8 weeks
6 weeks
3 weeks
4 weeks
9 weeks
11 weeks
1 week
Locate
facilities
Order
furniture
F
u
r
n
i
t
u
r
e
s
e
t
u
p
Interview
Hire and train
Remodel Move
in
Deterministic
Deterministic
time estimates
time estimates
Figure 17.5

17-23
Example 1 Solution
Example 1 Solution
P a t h L e n g th
( w e e k s )
S la c k
1 - 2 - 3 - 4 - 5 - 6
1 - 2 - 5 - 6
1 - 3 - 5 - 6
1 8
2 0
1 4
2
0
6
Critical Path

17-24
 Network activities
 ES: early start
 EF: early finish
 LS: late start
 LF: late finish
 Used to determine
 Expected project duration
 Slack time
 Critical path
Computing Algorithm
Computing Algorithm

17-25
Probabilistic Time Estimates
Probabilistic Time Estimates
 Optimistic time
 Time required under optimal conditions
 Pessimistic time
 Time required under worst conditions
 Most likely time
 Most probable length of time that will be
required

17-26
Probabilistic Estimates
Probabilistic Estimates
Activity
start
Optimistic
time
Most likely
time (mode)
Pessimistic
time
to tp
tm te
Figure 17.8
Beta Distribution

17-27
Expected Time
Expected Time
te = to + 4tm +tp
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time

17-28
Variance
Variance

 (tp – to)2
36

= variance
to = optimistic time
tp = pessimistic time

17-29
Example 5
Example 5
1-3-4
a
3-4-5
d
3-5-7
e
5-7-9
f
2-4-6
b
4-6-8
h
2
-
3
-
6
g
3-4-6
i
2
-
3
-
5
c
Optimistic
time
Most likely
time
Pessimistic
time

17-30
Example 5 Time Estimates
Example 5 Time Estimates
2.83
a
4.00
d
5.0
e
7.0
f
4.00
b
6.0
h
3
.
3
3
g
4.17
i
3
.
1
7
c
Tabc = 10.0
Tdef = 16.0
Tghi = 13.50

17-31
Path Probabilities
Path Probabilities
Z =
Specified time – Path mean
Path standard deviation
Z indicates how many standard deviations
of the path distribution the specified tine
is beyond the expected path duration.

17-32
17
Weeks
Weeks
Weeks
Weeks
10.0
16.0
13.5
1.00
1.00
a-b-c
d-e-f
g-h-i
Example 6
Example 6

17-33
Time-cost Trade-offs: Crashing
Time-cost Trade-offs: Crashing
 Crash – shortening activity duration
 Procedure for crashing
 Crash the project one period at a time
 Only an activity on the critical path
 Crash the least expensive activity
 Multiple critical paths: find the sum of
crashing the least expensive activity on
each critical path

17-34
Time-Cost Trade-Offs: Crashing
Time-Cost Trade-Offs: Crashing
Total
cost
Shorten
Shorten
Cumulative
cost of
crashing
Expected indirect costs
Optimum
CRASH
Figure 17.11

17-35
6
a
4
d
5
c
10
b
9
e
2
f
Example 7
Example 7

17-36
Advantages of PERT
Advantages of PERT
 Forces managers to organize
 Provides graphic display of activities
 Identifies
 Critical activities
 Slack activities 1
2
3
4
5 6

17-37
Limitations of PERT
Limitations of PERT
 Important activities may be omitted
 Precedence relationships may not be
correct
 Estimates may include
a fudge factor
 May focus solely
on critical path
1
2
3
4
5 6
142 weeks

17-38
Goldratt’s Critical Chain
Goldratt’s Critical Chain
 Goldratt’s insight on project management
 Time estimates are often pessimistic
 Activities finished ahead of schedule often go
unreported
 With multiple projects, resources needed for one
project may be in use on another

17-39
 Computer aided design (CAD)
 Groupware (Lotus Notes)
 CA Super Project
 Harvard Total Manager
 MS Project
 Sure Track Project Manager
 Time Line
Project Management Software
Project Management Software

17-40
 Imposes a methodology
 Provides logical planning structure
 Enhances team communication
 Flag constraint violations
 Automatic report formats
 Multiple levels of reports
 Enables what-if scenarios
 Generates various chart types
Advantages of PM Software
Advantages of PM Software

17-41
 Risk: occurrence of events that have
undesirable consequences
 Delays
 Increased costs
 Inability to meet specifications
 Project termination
Project Risk Management
Project Risk Management

17-42
 Identify potential risks
 Analyze and assess risks
 Work to minimize occurrence of risk
 Establish contingency plans
Risk Management
Risk Management

17-43
Summary
Summary
 Projects are a unique set of activities
 Projects go through life cycles
 PERT and CPM are two common
techniques
 Network diagrams
 Project management software available

17-44
Video: Work Breakdown
Video: Work Breakdown

17-45
Video: Project Materials/Delays
Video: Project Materials/Delays

17-46
Video: Project Scheduling
Video: Project Scheduling

17-47
Video: PERT/CPM
Video: PERT/CPM

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