Cpm Operation Management

							Operations Management
        (MD021)

    Project Management
        Agenda

   Projects and Project Management
   Tools and Technologies
   Network Diagrams
   Deterministic Time Estimates
   Project Crashing
   Probabilistic Time Estimates
   Risk Management
Projects and Project
   Management
      Projects
                JAN   FEB   MAR   APR   MAY      JUN
      Build A

      A Done

      Build B

      B Done

      Build C

      C Done
                                              On time!
      Build D

      Ship

 Projects are unique, one-time operations
  designed to accomplish a specific set of
  objectives in a limited time frame.
The Life Cycle of Projects
        Project Management

 Project Management involves tasks of managing
  a project throughout its life cycle from its
  inception through to its completion
    Often a team-based approach in companies

 How is it different?
    Limited time frame
    Narrow focus, specific objectives
    Less bureaucratic

 Why is it used?
    Special needs
    Pressures for new or improved products or services
  Project Management takes place
  across the Project Life Cycle


                    Feasibility




                                  Management
                    Planning
Concept
                    Execution

                    Termination
         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
       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
      Key Decisions

 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

 Which project(s) to implement?
   Sometimes obvious – whatever managers tell you to
    do
   Some companies have multiple, concurrent projects
    that they must decide between

 Selecting a project manager?
   Typically good to select someone with professional
    experience in managing projects
   Companies, however, often just assume that any
    manager can manage a project – leading to BAD
    results
      Project Manager typically should
      be skilled at managing projects
 Responsible for:
           Work              Quality
           Human Resources   Time
           Communications    Costs
          Key Decisions

 Selecting the Project Team?
    Managers often allocate their MEDIOCRE employees to projects
    In contrast, for success, project manager needs to have BEST
     people on project

 Planning/Designing/Managing/Controlling project?
    Many, many different techniques, tools, strategies

 Terminate the project?
    Sometimes, no matter how much money you sink in, a project
     will never be successful.
    Managers have a horrible tendency to be optimistic about
     completion; also, it is their butt that will get fired if project fails
    Need to kill a failing project as soon as possible – saves the
     wasting of any more money
        Ethical Issues in Project
        Management
 Temptation to understate costs
 Temptation to withhold information
     to get project approved
     to keep project from being terminated
   Misleading status reports
   Falsifying records
   Comprising workers’ safety
   Approving substandard work
Tools and Technologies for
  Project Management
        Tools and Technologies

 What are the tools?
     Gantt charts
     Work breakdown structure
     Network diagram
     Risk management


 Technologies?
   Software packages
          Technology for Managing
          Projects
 Computer aided design (CAD)
    modeling/diagramming/flowcharting


 Groupware (Lotus Notes, Groove)
    team collaboration


 Project management software
      CA Super Project
      Harvard Total Manager
      MS Project
      Sure Track Project Manager
      Time Line
        Advantages of PM Software

   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
          Gantt Charts are often used in
          project planning and scheduling

Gantt Chart            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 in MS Project
   Work Breakdown Structure

               Project X


Level 1


Level 2

Level 3

Level 4
Work Breakdown Structure
Network Diagrams
     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
       Advantages of PERT

 Forces managers to organize
 Provides graphic display of activities
 Identifies                       4
   Critical activities       2
   Slack activities
                          1           5    6



                              3
       Limitations of PERT

 Important activities
  may be omitted
                                    4
 Precedence
  relationships may not    2

  be correct
 Estimates may        1                   5   6
  include
  a fudge factor               142 weeks
 May focus solely
                           3
  on critical path
         The Network Diagram

 Network (precedence) diagram
    Activity-on-arrow (AOA)
    Activity-on-node (AON) – WE COVER THIS ONLY


 Activities
    project steps that consumer resources and/or time


 Events
    starting and finishing of activities
          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
    Project Network – Activity on
    Node
                    Order
                    furniture
AON    Locate       2              Furniture
       facilities                  setup

           1                       6
                                                   Move
                        Remodel
                                                   in

S                              5               7

                    Hire and
        Interview
                    train

           3            4
Deterministic Time Estimates
       Time Estimates

 Deterministic
   Time estimates that are fairly certain


 Probabilistic
   Estimates of times that allow for variation
    Example of Deterministic Task
    Times (AON)
    8 weeks

       1


S                   3              4

                 9 weeks         1 week



       2      Completion Time?

    4 weeks   Critical Path?

              Slack Times along Non-Critical Path(s)?
      Example of Solution for
      Deterministic Times

Critical Path


     Path       Length      Slack
                (weeks)
1-2-3-4-5-6      18             2
1-2-5-6          20             0
1-3-5-6          14             6
         Algorithm for identifying project completion
         time, critical path, slack time

 Network activities
     ES: Early Start = earliest time an activity can start
     EF: Early Finish = earliest time an activity can finish
     LS: Late Start = latest time an activity can start
     LF: Late Finish = latest time an activity can finish


 Used to determine
   Expected project duration
   Slack time
   Critical path
        Forward/Backward Method

 Forward Pass                       Backward Pass
   Start at left side of diagram      Start at right side of
   For each beginning activity,        diagram
    ES = 0                             Use the largest EF as the
   For each activity, ES +             LF for all ending activities
    activity time = EF                 For each activity, LS = LF –
   For the following activity,         activity time
    ES = EF of preceding               For the preceding activity,
    activity                            LF = LS of following activity
       Or, if multiple preceding          Or, if multiple immediately
        activities,                         following activities,
        ES = maximum(EF’s of all            LF = minimum(LS’s of all
        preceding activities)               following activities)
Solving an AON project network
Project “Crashing”
       Project Crashing

 Crashing a project involves paying more money
  to complete a project more quickly.
 Since the critical path determines the length of a
  project, it makes sense to reduce the length of
  activities on the critical path.
 CP activities should be reduced until the project
  is reduced to the desired length or you are
  paying more per day than you save.
 If you have multiple CPs, they should be
  shortened simultaneously.
         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
               Example of Crashing

                             6                      13
           S                 a                      b                 F

                                       5
                                       c

Activity Normal Time Crash Time Cost/Day to Crash        Critical Path = (a,b)
=============================================
a             6            5            $100             Normal completion time = 19
b             13           5            $400             Cost(18 days) = $100
c              5          4             $300
                                                         Cost(17 days) = $500
                                                         Cost(16 days) = $900
                                                         …
                                                         Cost(10 days) = $3300
Probabilistic Time Estimates
            Probabilistic Time Estimates
            Involve a Distribution of Times




                    to                tm   te                   tp

 Activity      Optimistic         Most likely              Pessimistic
 start         time               time (mode)              time



Typically, we assume that times follow a Beta probability distribution function
       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
Expected Time


  te    = to + 4tm +tp
                6
       te = expected time
       to = optimistic time
       tm = most likely time
       tp = pessimistic time
         Variance of Time

                                      2 = variance
2       (tp – to)2                  to = optimistic time
              36                      tp = pessimistic time


      path     ( variances of activities on path)
    Example Using Probabilistic Time
    Estimates (AON)
       Optimistic   Most likely   Pessimistic
       time         time          time


      1-3-4          2-4-6            2-3-5
        a              b                c


      3-4-5          3-5-7            5-7-9
S       d              e                f       F


      2-3-6          4-6-8            3-4-6
        g              h                i
                     Path Probabilities

                                   Specified time – Path mean
                     Z =
                                    Path standard deviation
                   Z indicates how many standard deviations
                   of the path distribution the specified tine
                   is beyond the expected path duration.
 path     ( variances of activities on path)
              Example Using Probabilistic Time
              Estimates (AON)
                         3-4-5               2-3-4
          S                a                   b                 F

  Task a: te = (3 + 4(4) + 5)/6 = 24/6 = 4
                                                 Length of Path (a,b) = 4 + 3 = 7
  Task b: te = (2 + 4(3) + 4)/6 = 18/6 = 3

Task a: σ2act = (5-3)2/36 = 4/36
                                       σ2Path (a,b) = 4/36 + 4/36 = 8/36
Task b: σ2act = (4-2)2/36 = 4/36
                                             σPath (a,b) = sqrt(8/36) = 0.471

          Question: Can we complete this project by Period 8?
         Z = (8 – 7)/0.471 = 2.12    Prob{Complete by period 8} = 0.983
Risk Management
         Project Risk Management

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

   Identify potential risks
   Analyze and assess risks
   Work to minimize occurrence of risk
   Establish contingency plans