Production and Operations Management: Manufacturing and Services

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Chapter 3
Project Management
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3-2
OBJECTIVES

• Definition of Project Management
• Work Breakdown Structure
• Project Control Charts
• Structuring Projects
• Critical Path Scheduling

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Project Examples
3-3

• Building a ship, a satellite, an oil rig, and a
  nuclear plant.
• Developing computer programs, an advertising
  campaign, a new product, a new process, and
  training materials.
• Implementing new technologies and work
  procedures.

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Project Management Defined

• A Project is a series of related jobs usually
  directed toward some major output and requiring a
  significant period of time to perform
• Project Management are the management activities
  of planning, directing, and controlling resources
  (people, equipment, material) to meet the
  technical, cost, and time constraints of a project

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Objectives of a Project
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Objectives of a Project
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The 4th dimension client satisfaction
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Project Life Cycle
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• Project Life Cycle changing patterns of resource
  usage and level of activity over the course of
  the project

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Project Life Cycle
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• Stages of a Conventional Project
• Slow beginning
• Buildup of size
• Peak
• Begin a decline
• Termination

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Project Life Cycle
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Project Life Cycle
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• Time distribution of project effort is
  characterized by slow-rapid-slow

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Project Life Cycle
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• Try to avoid the 90-90 rule of project
  management
• The first 90 of the project takes 90 of the
  time, the last 10 takes the other 90.

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Project Life Cycle
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• What does this rule really mean?

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Project Life Cycle
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• During the life cycle cycle, project management
  is accomplished through the use of processes such
  as
• Initiating, planning, executing, controlling, and
  closing
• Many of these processes are iterative in nature
  because the project is being progressively
  elaborated

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Project Life Cycle
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• An Alternate View
• Stage 1 Excitement Euphoria
• Stage 2 Disenchantment
• Stage 3 Search for the Guilty
• Stage 4 Punishment of the Innocent
• Stage 5 Distinction for the Uninvolved
• Author unknown but believed to have perished in
  stage 4

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Structuring ProjectsPure Project Advantages
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Pure Project Defined
A pure project is where a self-contained team
works full-time on the project

• The project manager has full authority over the
  project
• Team members report to one boss
• Shortened communication lines
• Team pride, motivation, and commitment are high

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Structuring Projects Pure Project Disadvantages
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• Duplication of resources
• Organizational goals and policies are ignored
• Lack of technology transfer
• Team members have no functional area "home"

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Functional Project
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A functional project is housed within a
functional division
Example, Project B is in the functional area of
Research and Development.
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Structuring Projects Functional Project
Advantages
3-18

• A team member can work on several projects
• Technical expertise is maintained within the
  functional area
• The functional area is a home after the project
  is completed
• Critical mass of specialized knowledge

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Structuring Projects Functional Project
Disadvantages
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• 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

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Matrix Project Organization Structure
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President
Research and Development
Engineering
Manufacturing
Marketing
Manager Project A
Manager Project B
Manager Project C
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Structuring Projects Matrix Advantages
3-21

• Enhanced communications between functional areas
• Pinpointed responsibility
• Duplication of resources is minimized
• Functional home for team members
• Policies of the parent organization are followed

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Structuring Projects Matrix Disadvantages
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• Too many bosses
• Depends on project managers negotiating skills
• Potential for sub-optimization

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Defining Project Objectives
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Defining Project Objectives

• Why Set Project Objectives
• To provide direction for project activities
• To enable measuring results against prior
  exceptions
• Resource usage (manpower, materials, etc.)
• Schedule integrity
• Quality of work
• To determine specific goals which will provide
  maximum effectiveness of project activities

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Defining Project Objectives

• Requirements for Project Objectives
• Achievable (time, resources, staff)
• Understandable (vs. complex)
• Specific (vs. general, vague statements)
• Tangible (deliverables)
• Measurable (resources, schedule, quality)
• Consistent (with strategy, programs, policies,
  procedures)
• Assignable (department or individual)

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Defining Project Objectives

• Some Problems in Setting Objectives
• Stating activities rather than deliverables
• Exceeding the scope of the defined project
• Failing to be specific
• Omitting important deliverables
• Inconsistency with stated policies

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Defining Project Objectives

• Example D.U. Singer Project
• Title Permanent Antiseptic Production Start-Up
• Objectives
• Develop a comprehensive plan for the production
  of a new, permanent antiseptic
• Complete development and testing of a
  manufacturing process that
• Meets all current FDA, EPA, and OSHA regulations
  as well as internal specifications
• produces 95 yield of product (full packaged) at
  a level of 80 of full production goal of 10
  million liters per year

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Another problem in objective setting
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Work Breakdown Structure
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A work breakdown structure defines the hierarchy
of project tasks, subtasks, and work packages
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Work Breakdown Structure

• Program New Product Introduction
• 1.0 Project 1 Engineering Development
• 1.1 Task 1 Run pilot test
• 1.2 Task 2 Review process costs and
  efficiencies
• 1.3 Task 3 Prepare Capital Equipment List
• 2.0 Project 2 Market Survey
• 2.1 Task 1 Complete Market Survey
• 2.2 Task 2 Analyze Survey Results
• 2.3 Task 3 Prepare Marketing Plan

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Work Breakdown Structure

• 3.0 Project 3 Manufacturing Start-up
• 3.1 Task 1 Install and Test New Equipment
• 3.2 Task 2 Establish Manufacturing
  Procedures
• 3.3 Task 3 Detailed Testing of Initial Output
  
• 4.0 Project 4 Sales Force Training
• 4.1 Task 1 Select Sales People
• 4.2 Task 2 Select Distributors
• 4.3 Task 3 Train Sales Force and
  Distributors

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Gantt Chart
3-32
Vertical Axis Always Activities or Jobs
Horizontal bars used to denote length of time for
each activity or job.
Activity 1 Activity 2 Activity 3 Activity
4 Activity 5 Activity 6
Time
Horizontal Axis Always Time
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Service Activities for A Delta Jet During a 60
Minute Layover
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Network-Planning Models
3-34

• A project is made up of a sequence of activities
  that form a network representing a project
• 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
• Critical Path Method (CPM) helps to identify the
  critical path(s) in the project networks

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Prerequisites for Critical Path Methodology
3-35

• A project must have
• well-defined jobs or tasks whose completion
  marks the end of the project
• independent jobs or tasks
• and tasks that follow a given sequence.

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Types of Critical Path Methods
3-36

• CPM with a Single Time Estimate
• Used when activity times are known with certainty
• Used to determine timing estimates for the
  project, each activity in the project, and slack
  time for activities
• CPM with Three Activity Time Estimates
• Used when activity times are uncertain
• Used to obtain the same information as the Single
  Time Estimate model and probability information
• Time-Cost Models
• Used when cost trade-off information is a major
  consideration in planning
• Used to determine the least cost in reducing
  total project time

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Steps in the CPM with Single Time Estimate
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• Activity Identification
• Activity Sequencing and Network Construction
• Determine the critical path
• From the critical path all of the project and
  activity timing information can be obtained

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CPM with Single Time Estimate
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Consider the following consulting project
Develop a critical path diagram and determine the
duration of the critical path and slack times for
all activities.
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First draw the network
3-39
Act. Imed. Pred. Time
A None 2
B A 1
C B 1
D C 2
E C 5
F D,E 5
G F 1
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Find the Critical Path
3-40

• Activities on the critical path cannot be delayed
  without delaying the completion of the project
• There are two paths
• A B C D F G 12 weeks
• A B C E F G 15 weeks
• Activity D can be delayed by up to 3 weeks
  without delaying the project
• The longest path is critical why?

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Determine early starts and early finish times
3-41
ES4 EF6
D(2)
ES0 EF2
ES2 EF3
ES3 EF4
ES9 EF14
ES14 EF15
G(1)
A(2)
B(1)
C(1)
F(5)
ES4 EF9
Hint Start with ES0 and go forward in the
network from A to G.
E(5)
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Determine late starts and late finish times
3-42
Hint Start with LF15 or the total time of the
project and go backward in the network from G to
A.
ES4 EF6
ES0 EF2
ES2 EF3
ES3 EF4
LS7 LF9
C(1)
ES4 EF9
LS14 LF15
LS9 LF14
LS4 LF9
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Critical Path Slack
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ES4 EF6
D(2)
ES0 EF2
ES2 EF3
ES3 EF4
LS7 LF9
C(1)
ES4 EF9
LS14 LF15
LS9 LF14
E(5)
LS4 LF9
Duration15 weeks
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Example 2 Great Valley Hospital Project
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Network for Great Valley Hospital Project
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3
2
2
2
4
3
5
4
Arrows show precedence relationships
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Critical Path for Great Valley Hospital Project
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F
A
C
E
Start
H
B
D
G
Arrows show precedence relationships
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Critical Path for Great Valley Hospital Project
3-47

• Four paths in the network
• Path 1 Start A C F H 9 weeks
• Path 2 Start A C E G H 15 weeks
• Path 3 Start A D G H 13 weeks
• Path 4 Start B D G H 14 weeks
• Path 2 is critical

See GreatValley.mpp
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Critical Path for Great Valley Hospital Project
3-48

• A, C, E, G, and H are on the critical path and so
  they have 0 slack
• B is on path 4, so its slack is 15 14 1
• D is on paths 3 and 4, so its slack is 15 Max
  (13,14) 1
• F is on path 1, so its slack is 15 9 6
• An activity can be delayed by its slack and not
  delay the project completion

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Critical Path Analysis Setup
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Latest Finish
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Determine early starts and early finish times
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Critical Path Analysis for Great Valley Hospital
Project
Slack0
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Great Valley Gantt Chart Earliest Start and
Finish
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Example 3. CPM with Three Activity Time Estimates
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Example 3. Expected Time Calculations
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ET(A) 34(6)15 6
ET(A)42/67
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Ex. 3. Expected Time Calculations
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ET(B) 24(4)14 6
ET(B)32/65.333
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Ex 3. Expected Time Calculations
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ET(C) 64(12)30 6
ET(C)84/614
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Example 3. Network
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Example 3. Probability Exercise
What is the probability of finishing this project
in less than 53 days?
p(t lt D)
t
TE 54
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(Sum the variance along the critical path.)
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3-59
TE 54
D53
p(Z lt -.156) .438, or 43.8 (NORMSDIST(-.156)
There is a 43.8 probability that this project
will be completed in less than 53 weeks.
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Ex 3. Additional Probability Exercise
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• What is the probability that the project duration
  will exceed 56 weeks?

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Example 3. Additional Exercise Solution
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p(Z gt .312) .378, or 37.8 (1-NORMSDIST(.312))
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Time-Cost Models
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• In construction, incentives for completing
  project early
• In new product development, revenue stream starts
  earlier if project is launched earlier
• Time-Cost Models
• To accelerate the completion of a project,
  expedite or crash the critical path project
  activity that has the cheapest cost per unit time
  to shorten its duration

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Steps in Time-Cost Analysis

• Using normal activity times, find the critical
  path
• Compute the crash cost per time period
• Crash cost/period (Crash cost - Normal cost)/
  (Normal time - Crash time)
• If there is only one critical path, select the
  activity on the critical path that (a) can still
  be crashed, and (b) has the smallest crash cost
  per period
• If there are multiple critical paths, select the
  cheapest crash cost combination of critical path
  activities that can still be crashed that will
  reduce ALL critical paths by one period
• Update all activity times and repeat process if
  further reduction in critical path time is desired

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Example 4. Great Valley Hospital Project with
Crashing

• Act. NT CT NC CC CC/WK CP?
• A 2 1 22,000 22,750 750
  Y
• B 3 1 30,000 34,000 2000
  N
• C 2 1 26,000 27,000 1,000
  Y
• D 4 3 48,000 49,000 1,000
  N
• E 4 2 56,000 58,000 1,000
  Y
• F 3 2 30,000 30,500 500
  N
• G 5 2 80,000 84,500 1,500
  Y
• H 2 1 16,000 19,000 3,000 Y

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Example 4. Great Valley Hospital Project Crashing
Analysis

• Select the activity with smallest crash cost per
  week that is on the critical path activity A at
  a cost of 750
• Start B D G H is also critical (14 wks)
• Crash G by 1 week at a cost of 1,500 to reduce
  the project by an additional week (vs. crashing C
  and D at a combined cost of 2,000)

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Question Bowl
3-66

• Which of the following are examples of Graphic
  Project Charts?
• Gantt
• Bar
• Milestone
• All of the above
• None of the above

Answer d. All of the above
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Question Bowl
3-67

• Which of the following are one of the three
  organizational structures of projects?
• Pure
• Functional
• Matrix
• All of the above
• None of the above

Answer d. All of the above
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Question Bowl
3-68

• A project starts with a written description of
  the objectives to be achieved, with a brief
  statement of the work to be done and a proposed
  schedule all contained in which of the following?
  
• SOW
• WBS
• Early Start Schedule
• Late Start Schedule
• None of the above

Answer a. SOW (or Statement of Work)
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Question Bowl
3-69

• For some activities in a project there
  may be some leeway from when an activity can
  start and when it must finish. What is this
  period of time called when using the Critical
  Path Method?
• Early start time
• Late start time
• Slack time
• All of the above
• None of the above

Answer c. Slack time
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Question Bowl
3-70

• How much slack time is permitted in the
  critical path activity times?
• Only one unit of time per activity
• No slack time is permitted
• As much as the maximum activity time in the
  network
• As much as is necessary to add up to the total
  time of the project
• None of the above

Answer b. No slack time is permitted (All
critical path activities must have zero slack
time, otherwise they would not be critical to the
project completion time.)
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Question Bowl
3-71

• When looking at the Time-Cost Trade Offs in the
  Minimum-Cost Scheduling time-cost model, we seek
  to reduce the total time of a project by doing
  what to the least-cost activity choices?
• Crashing them
• Adding slack time
• Subtracting slack time
• Adding project time
• None of the above

Answer a. Crashing them (We crash the
least-cost activity times to seek a reduced total
time for the entire project and we do it
step-wise as inexpensively as possible.)
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End of Chapter 3