Project Management

41
Chapter Four
McGraw-Hill/Irwin
Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

42
Copyright 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
LO41: Explain what projects are and how

projects are organized.
LO42: Analyze projects using networkplanning models.
LO43: Evaluate projects using earned value
management.
LO44: Exemplify how these techniques are
implemented in commercial software
packages.
43
A series of related jobs, usually directed toward

some major output and requiring a significant
period of time to perform.
An inter-related set of activities with a definite
starting and ending point, which results in a
unique outcome for a specific allocation of
resources.
What is a project?
44
A series of related jobs, usually directed toward some

major output and requiring a significant period of time
to perform.
What is project management?

Planning, directing, and controlling resources (people,
equipment, material, etc.) to meet the technical, cost,
and time constraints of the project.
Why is project management important?
What is a project?
At the highest levels of an organization, management

often involves juggling a portfolio of projects.
45
Multi
Disciplinary
Specific
Deliverables
What is
a
Project?
Specific Time
Frames
Specific and
Unique Tasks
Aimed at
meeting
Specific
Needs or
Purposes
46
Continuous
Line
Batch
Job Shop
Project
Production Systems with Increasing Customization
47
Unc
erta
inty
To improve
performance
, time and
/or cost must
increase
Balancing Project
Goals
Project
Manager
must know
how to tradeoff among
goals
Time
To reduce
time, reduce
performance
and/or
increase cost
Project
Goals
Performance
Cost
Leave some
Flexibility for
Project
Manager
Do not overdetermine
the system
To reduce
cost, reduce
performance
and/or
increase
time
48
Performance
Due
Date
Required
Performance
TARGET
Cost
Budget
Limit
GOALS OF A PROJECT
Time
49
Type of
Project
Degree of Change
410
A self-contained team works full-time on the project.

Functional Project
Responsibility for the project lies within one functional area
of the firm. Employees from that area work on the project,
usually only part-time.
Pure Project
Matrix Project
A blend of pure and functional project structures people
from different functional areas work on the project, possibly
only part-time.
411
Program
Manager
Manager,
Project A
Marketing
Manufacturing
R&D
Marketing
Manufacturing
Manager,
Project B
Finance
Personnel
R&D
President
PURE PROJECT ORGANIZATION

EACH PROJECT HAS FUNCTIONAL
SPECIALISTS FULL TIME
412
Dis
advantages
Duplication of resources
Organizational goals and policies are ignored
Lack of technology transfer
Team members have no functional area "home"
Specialists may have limited, and not deep experience
Projectitis. Tendency to drag projects
Advantages
The project manager has full authority. He is CEO for

the project
He has all functional specialists. Has all resources
Efficient and effective model for large projects
Team members report to one boss
Shortened communication lines
Team pride, motivation, and commitment are high
413
414
Disadvantages
Aspects of the project that are not

directly related to the functional area
get short-changed
Motivation of team members is often
weak
Needs of the client are secondary and
are responded to slowly
Advantages
A team member can work on several

projects
Technical expertise maintained in
functional area
Functional area is home after
project completed
Critical mass of specialized
knowledge
415
416
Disadvantages
Too many bosses Lack of unity of

command Potential for conflicts
Much more coordination across
projects required
Depends on project managers
negotiating skills
Potential for sub-optimization
Advantages
Better communications between

functional areas
Project manager held responsible for
success
Duplication of resources is
minimized
Functional home for team members
Policies of the parent organization
are followed
417
A written description of the objectives to be

achieved
Task
A further subdivision of a project usually
shorter than several months and performed by
a single group or organization
Statement of Work
Work Package
A group of activities combined to be assignable
to a single organizational unit
418
Specific events in the life of the project
Work Breakdown Structure

Defines the hierarchy of project tasks,
subtasks, and work packages
Project Milestone
Activities
Pieces of work that consume time
419
Overview
Details
420
Overview
Details
421
WORK BREAKDOWN STRUCTURE
Planning can be performed thoroughly. The Project

Manager and Staff are forced to think about all the
aspects of the project and missing links are identified.
Costs and budgets can be established.
However, it is not easy to prepare a WBS.
a) With too little levels , integration of activities will prove

difficult.
b) If too many levels exist, unproductive time is lost in

creating and analysis of the WBS. Cost of unproductive paper
work and loss of useful time is involved.
Should be easy to understand
422
WORK BREAKDOWN STRUCTURE
DETERMINANTS OF NUMBER OF LEVELS IN WBS:
a) The complexity and technical requirements of the work.
b)The cost of the project and resource requirements.
c)The duration of the project.
d)The client organisations and the project organisations

internal structures for management control and reporting.
423
AUDITORIUM
01
WOOD WORK
&ACOUSTICS
0101
WBS HIERARCHY
PRODUCT ORIENTED
(Partial only)
AIR COOLING
0102
SEATING
0103
REAR
PANELS
010101
SIDE
PANELS
010102
STAGE
PANELS
010103
STAGE
APRONS
010104
STAGE
BAFFLES
010105
AIR
WASHER
010201
DUCTING
010202
EXIT AIR
LOUVRE
010203
THERMO
STATS
010204
HUMIDO
STATS
010205
FLOOR
ELEVATION
010301
SEAT
FRAMES
010302
LOWER
CUSHIONS
010303
STAGE
FLOATS
010106
BACK
CUSHIONS
010304
424
WBS HIERARCHY
FUNCTIONALLY
ORIENTED Partial only
AUDITORIUM
01
CIVIL WORK
0102
CARPENTRY
0101
MAIN
PANELS
010101
AIR
WASHER
010201
STAGE
PANELS
010102
CONTROL
ROOM
010202
AIR
COOLING
010301
FLOATS
010103
FLOOR
ELEVA
TION
010203
CURTAIN
CONTROL
010302
ELECTRICAL
0103
SEAT
FLOOR
HANDLES COVERING
010104
010105
FOR
PROJE
CTION
010204
PROJE
CTION
010303
SOUND
010304
LIGHT
ING
010305
425
A precedes B, which precedes C.
AOA
A
1
AON
B
2
C
3
426
A and B must be completed before C can be started.
AOA
1
AON
A
C
B
2
C
B
427
B and C cannot begin until A has been completed.
AOA
3
A
1
AON
B
A
C
4
428
C and D cannot begin until both A and B have been

completed.
AOA
1
A
B
AON
C
3
429
C cannot begin until both A and B have been completed;

D cannot begin until B has been completed.
AOA
A
AON
Dummy
D
4
6
430
A
B
C
D
E
F
G
H
Description
Design Brochure & Announcement

Identify faculty team
Detailed Outline
Send application
Accept students
Select text
Order and receive text
Prepare rooms and kits
B
A
D
C
E,F
E
Duration
Days
7
8
4
18
7
7
12
4
Activity
Immediate
Predecessor(s)
431
Expected Time (days)
A-D-E-H
A-D-E-G
B-C-F-G
AON Network
A
7
D
18
36
44
31
E
7
H
4
Finish
Start
B
8
C
4
F
7
G
12
Path
432
Earliest Start Time:

Is the latest of the EFTs of the immediately
preceding activities;
Is zero for activities with no predecessors.
Earliest Finish Time:
Is EST + Estimated duration t of that
activity
Move from Start to Finish Node.
433
Latest Finish Time:

Is the earliest of the latest start times of activities
that will immediately follow it.
Concept is activity goes later than this, project will
slip in time, and critical path will take more time
or may change.
Move from Finish Node to Start.
Latest Start Time:

Is Latest Finish Time minus activity duration t
434
Total Slack: LS ES or LF EF
There is another type of slack called Free
slack which can be discussed in advanced
course.
Activity Slack:
Is the maximum length of time that an
activity can be delayed without delaying
the entire project.
435
Earliest finish time
Earliest start time

0 A 7
0
7
7 D 25
25 E 32
32 H 36
18
Start
Finish
32 G 44
0 B 8
8 C 12
12 F 19
12
Earliest Start & Earliest Finish Times
436
Latest start time

D
0 A 7
0 7 7
07 18 25
25
Latest finish time
32
32 H 36
25 7 32
40 4 44
25
Critical path
Start
Finish
13 8 21
8 C 12
12 F 19
21 4 25
25 7 32
32 G 44
32
44
12
Latest Finish & Latest Start Times

Right to Left
437
The path taking longest time through this network of

activities is called the critical path.
The critical path provides a wide range of scheduling
information useful in managing a project.
A project is made up of a sequence of activities that

form a network representing a project.
Critical path method (CPM) helps to identify the

critical path(s) in the project networks.
438
Determine the required sequence

and construct a network diagram.
Determine the critical path.
Identify each activity to be done

and estimate how long it will take.
Determine the early start/finish

and late start/finish schedule.
439
..and there is uncertainty associated with time

taken by activities.
This uncertainty needs to be accounted for.
In most real projects, deterministic time is not

possible,
Probabilistic distributions of activity times

can be calculated using computer simulation
or statistical approach.
440
Completion date is computed for one trial.

Many such trials are done and a final estimate
arrived at.
In simulation, a time for each activity is

randomly chosen from a probability
distribution for that activity.
We are adopting the statistical analysis

approach in PERT
441
Minimum Or Optimistic (a)is the shortest time

in which an activity can be completed if all goes
well.
Maximum Or Pessimistic (b) is the most
probable time required to perform an activity
Most likely (m) is the probable time required to
perform an activity
When activity times vary, a single time

estimate may not be reliable.
Instead, estimate three values
This allows calculation of a probability

estimate of completion time.
442
In a normal distribution, m has to be situated

symmetrically.
A beta distribution allows m to fall anywhere
from a to b.
In PERT/CPM, a,m,b are parameters of a beta

probability distribution, which is followed by
the random variable (activity).
443
Probability
Probabilistic Time Estimates
Time
Mean
Figure 8.12 (a) Beta Distribution
444
+4+
6
2 =
=
=
=
=
2 =
Excel: PERT
Calculations
For the Excel template visit
www.mhhe.com/sie-chase14e
445
446
C(7)
0
21
F(8)
28
21
36
28
36
28
A(21)
38
36
G(2)
21
26
21
B(5)
21
28
26
28
D(2)
26
26
33
E(5)
28
31
36
38
28
21
36
447
Probability of finishing in 35 weeks (or less)
448
Probability
of finishing
in 35
weeks (or
less) is
about 19%
449
Expected time along a path is the sum of the

activity times along the path.
The variance of the path is the sum of the
variances on the path.
The variance of the project is the sum of the
variances on critical path.
Central limit theorem : It states that the sum

of a group of independent randomly
distributed variables approaches a normal
distribution as the number of variables
increases.
450

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41

Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

LO41: Explain what projects are and how

A series of related jobs, usually directed toward

A series of related jobs, usually directed toward some

What is project management?

Why is project management important?

At the highest levels of an organization, management

Production Systems with Increasing Customization

A self-contained team works full-time on the project.

PURE PROJECT ORGANIZATION

The project manager has full authority. He is CEO for

Aspects of the project that are not

A team member can work on several

Too many bosses Lack of unity of

Better communications between

A written description of the objectives to be

Specific events in the life of the project

Work Breakdown Structure

WORK BREAKDOWN STRUCTURE

Planning can be performed thoroughly. The Project

Costs and budgets can be established.

However, it is not easy to prepare a WBS.

a) With too little levels , integration of activities will prove

b) If too many levels exist, unproductive time is lost in

WORK BREAKDOWN STRUCTURE

DETERMINANTS OF NUMBER OF LEVELS IN WBS:

a) The complexity and technical requirements of the work.

b)The cost of the project and resource requirements.

c)The duration of the project.

d)The client organisations and the project organisations

A precedes B, which precedes C.

A and B must be completed before C can be started.

B and C cannot begin until A has been completed.

C and D cannot begin until both A and B have been

C cannot begin until both A and B have been completed;

Design Brochure & Announcement

Expected Time (days)

Earliest Start Time:

Move from Start to Finish Node.

Latest Finish Time:

Move from Finish Node to Start.

Latest Start Time:

Earliest finish time

Earliest start time

Earliest Start & Earliest Finish Times

Latest start time

Latest finish time

Latest Finish & Latest Start Times

The path taking longest time through this network of

A project is made up of a sequence of activities that

Critical path method (CPM) helps to identify the

Determine the required sequence

Identify each activity to be done

Determine the early start/finish

..and there is uncertainty associated with time

In most real projects, deterministic time is not

Probabilistic distributions of activity times

Completion date is computed for one trial.

In simulation, a time for each activity is

We are adopting the statistical analysis

Minimum Or Optimistic (a)is the shortest time

When activity times vary, a single time

This allows calculation of a probability