Chapter 7 & 14 Case Study

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Introduction to Operations and Supply Chain Management

Fifth Edition

Chapter 14

Managing Projects

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Chapter Objectives

Be able to:

Explain the difference between routine business activities and projects.

Describe the five major phases of a project.

Construct a Gantt chart or project network diagram, and use these tools to manage a project.

Describe some of the key features and advantages of project management software.

Describe what the Project Management Institute is, and what type of information can be found in the Institute’s Project Management Body of Knowledge (PMBOK ®)

Introduction

Project – A temporary endeavor undertaken to create a unique product, service, or result.

Projects have clear starting and ending points after which the people and resources dedicated to the project are reassigned.

Projects are nonroutine, can be large or small, and may be difficult to manage.

Projects typically require significant levels of cross-functional and interorganizational coordination.

The Growing Importance of Project Management

Project Management – The application of knowledge, skills, tools, and techniques to project activities to meet project requirements.

Project Management is gaining importance as a management discipline due to:

Companies accepting the fact that complex projects can be managed well.

Professional organizations such as the Project Management Institute have emerged.

The pace of strategic change has quickened.

The traditional role of middle management has shrunk.

Project Phases (1 of 4)

Concept Phase

Project Definition Phase

Planning Phase

Performance Phase

Postcompletion Phase

Figure 14.1 Five Phases of a Generic Project

Project Phases (2 of 4)

Concept Phase

The first of five phases of a project where project planners develop a broad definition of what the project is and what its scope will be.

Outputs – Examples include: initial budget estimates, estimates of personnel needed, and required completion dates.

Project Definition Phase

The second of five phases of a project where project planners identify how to accomplish the work, how to organize for the project, the key personnel and resources required to support the project, tentative schedules, and tentative budget requirements.

Project Phases (3 of 4)

Planning Phase

The third of five phases of a project where project planners prepare detailed plans that identify activities, time and budgets targets, and the resources needed to complete each task, while also putting into place the organization that will carry out the project.

Performance Phase

The fourth of five phases of a project where the organization actually starts to execute the plan.

Project Phases (4 of 4)

Postcompletion Phase

The fifth of five phases of a project where the project manager or team confirms the final outcome, conducts a postimplementation meeting to critique the project and personnel, and reassigns project personnel.

Project Management Tools (1 of 9)

Gantt charts – A graphical tool used to show expected start and end times for project activities and to track actual progress against these time targets.

Network Diagrams – A graphical tool that shows the logical linkages between activities in a project.

Example 14.1 - Courter Corporation (1 of 4)

Courter Corporation makes high-end speakers that are used with home entertainment systems.

Courter has designed a new speaker, the Gina3000, which is louder and more reliable than Courter’s earlier model.

Management has outlined 10 activities that must be completed before the Gina3000 speakers can be released for regular production.

Example 14.1 - Courter Corporation (2 of 4)

Table 14.2 List of Activities for the Gina3000 Project

Activity	Blank	Duration (Weeks)	Predecessors
A	Legal department approves prototype use	2	None
B	R&D* builds prototype speakers	3	None
C	Customer uses and approves prototypes	3	A, B
D	New equipment is ordered and installed	5	C
E	Manufacturing produces sample speakers	2	D
F	R&D* writes up product specifications	3	C
G	Customer tests and approves sample speakers	3	E, F
H	QA** tests and approves sample speakers	3	E
I	Manufacturing finalizes process	3	E
J	Management approves product for regular production	2	G, H, I

*Research and Development. **Quality Assurance.

Example 14.1 - Courter Corporation (3 of 4)

Figure 14.2 Initial Gantt Chart for the Gina3000 Project

Example 14.1 - Courter Corporation (4 of 4)

As time goes on, Courter can use a Gantt chart to check its progress against the plan.

The shading represents how much of each activity has been completed.

Figure 14.3 Gantt Chart at the End Of Week 8 (blue shading indicates proportion completed)

Project Management Tools (2 of 9)

Network Diagrams

Critical-path method – A network-based technique in which there is a single time estimate for each activity.

Program evaluation and review technique (PERT) – A network-based technique in which there are multiple time estimates for each activity.

Project Management Tools (3 of 9)

Constructing a Network Diagram

Identify each unique activity in a project by a capital letter that corresponds only to that activity.

Represent each activity in the project by a node that shows the estimated time it will take to complete the activity. (activity on node (AON) diagram)

If an activity has an immediate predecessor(s), show the relationship by connecting the two activities with an arrow. The network diagram consists of all the activity nodes and arrows linking them together.

Project Management Tools (4 of 9)

Determine the earliest start time (ES) and earliest finish time (EF) for each activity by performing a forward pass.

Determine the latest finish time (LF) and latest starting time (LS) for each activity by doing a backward pass.

Determine the critical activities and path(s) in the project.

Project Management Tools (5 of 9)

Constructing a Network Diagram

Critical activity – Project activity for which the earliest start time and latest start time are equal. A critical activity cannot be delayed without lengthening the overall project duration.

Network path – A logically linked sequence of activities in a network diagram.

Critical path – A network path that has the longest, or is tied for the longest, linked sequence of activities.

Project Management Tools (6 of 9)

Forward Pass

The determination of the earliest start and finish times for each project activity.

Earliest Start Time (ES)

The earliest an activity can be started, as determined by the earliest finish time for all immediate predecessors

ES = Latest EF for all immediate predecessors

Earliest Finish Time (EF)

The earliest an activity can be finished, calculated by adding the activity’s duration to its earliest start time.

EF = ES + activity’s duration

Project Management Tools (7 of 9)

Backward Pass

The determination of the latest finish and start times for each project activity.

Latest Finish Time (LF)

The latest an activity can be finished and still finish the project on time, as determined by the latest start time for all immediate successors.

LF = Earliest LS for all immediate successors

Project Management Tools (8 of 9)

Latest Start Time (LS)

The latest an activity can be started and still finish the project on time, calculated by subtracting the activity’s duration from its latest finish time.

LS = LF – activity’s duration

Slack = amount of allowable delay in an activity

Slack = LS – ES

Example 14.2 - Courter Corporation (1 of 7)

Courter Corporation decides to follow the six steps to create a network diagram of the Gina3000 project.

Step 1: Identify each unique activity in a project by a capital letter that corresponds only to that activity

See Table 14.2

Step 2: Represent each activity in the project by a node that also shows the estimated time it will take to complete the activity.

Example 14.2 - Courter Corporation (2 of 7)

Courter Corporation decides to follow the six steps to create a network diagram.

Step 3: If an activity has an immediate predecessor, show that relationship by connecting the two activities with an arrow

Figure 14.4 AON Network Diagram for the Gina3000 Project

Example 14.2 - Courter Corporation (3 of 7)

Courter Corporation decides to follow the six steps to create a network diagram.

Step 4: Determine the earliest start time (ES) and earliest finish time (EF) for each activity.

Example 14.2 - Courter Corporation (4 of 7)

Table 14.3 Earliest Start (ES) and Earliest Finish (EF) Times for Gina3000 Project

Activity	Duration	Predecessors	ES	EF
A	2	None	0	2
B	3	None	0	3
C	3	A, B	3	6
D	5	C	6	11
E	2	D	11	13
F	3	C	6	9
G	3	E, F	13	16
H	3	E	13	16
I	3	E	13	16
J	2	G, H, I	16	18

Example 14.2 - Courter Corporation (5 of 7)

Courter Corporation decides to follow the six steps to create a network diagram.

Step 5: Determine the latest finish time (LF) and latest start time (LS) for each activity.

Example 14.2 - Courter Corporation (6 of 7)

Table 14.4 Results of Forward and Backward Passes on the Gina3000 Project

Activity	Duration (Weeks)	Predecessors	ES	EF	LS	LF
A	2	None	0	2	1	3
B*	2	None	0	3	0	3
C*	3	A, B	3	6	3	6
D*	5	C	6	11	6	11
E*	2	D	11	13	11	13
F	3	C	6	9	10	13
G*	3	E, F	13	16	13	16
H*	3	E	13	16	13	16
I*	3	E	13	16	13	16
J*	2	G, H, I	16	18	16	18

*Critical activity.

Example 14.2 - Courter Corporation (7 of 7)

Courter Corporation decides to follow the six steps to create a network diagram.

Step 6: Determine the critical activities and path(s) in the project.

ACFGJ = 13 weeks

ACDEGJ = 17 weeks

ACDEHJ = 17 weeks

ACDEIJ = 17 weeks

BCFGJ = 14 weeks

BCDEGJ = 18 weeks

BCDEHJ = 18 weeks

BCDEIJ = 18 weeks

The activities in these critical paths have no slack.

The project should be completed in 18 weeks.

Project Management Tools (9 of 9)

Crashing a Project – Shortening the overall duration of a project by reducing the time it takes to perform certain activities.

List all network paths and their current lengths and mark all activities that can be crashed.

Focus on the critical path or paths. Working one period at a time, choose the activity or activities that will shorten all critical paths at the least cost. The one rule is this: Never crash an activity that is not on a critical path, regardless of the cost. Doing so will not shorten the project; it will only add costs.

Recalculate the lengths of all paths and repeat step 2 until the target project completion time is reached or until all options have been exhausted.

Example 14.3 - Courter Corporation (1 of 8)

Use the following data to develop a schedule to complete the project within 23 weeks:

Table 14.5 List of Activities for Supplier Selection and Evaluation Project

Activity	Blank	Original Length (Weeks)	Predecessors	Number of Weeks Activity can be Crashed	Crash Cost Per Week
A	Assemble project team	2	None	–	Blank
B	Identify potential suppliers	6	A	1	$500
C	Develop supplier evaluation criteria	4	A	–	Blank
D	Develop audit form	3	C	1	$800
E	Perform supplier financial analysis	2	B	–	Blank
F	Visit suppliers	8	E, D	2	$2,000

Example 14.3 - Courter Corporation (2 of 8)

[Table 14.5 Continued]

Activity	Blank	Original Length (Weeks)	Predecessors	Number of Weeks Activity can be Crashed	Crash Cost Per Week
G	Compile visit results	5	F	1	$700
H	Identify needs for IT system	4	A	–	Blank
I	Perform systems analysis and coding	10	H	2	$300
J	Test system	3	I	–	Blank
K	Select final suppliers	2	G	–	Blank

Example 14.3 - Courter Corporation (3 of 8)

Figure 14.6 Network Diagram for Project

Example 14.3 - Courter Corporation (4 of 8)

Calculate ES, EF, LS, and LF for each activity

Table 14.6 Results of Forward and Backward Passes for Project

Activity	Duration (Weeks)	Predecessors	ES	EF	LS	LF
A*	2	None	0	2	0	2
B*	6	A	2	8	2	8
C	4	A	2	6	3	7
D	3	C	6	9	7	10
E*	2	B	8	10	8	10
F*	8	E, D	10	18	10	18

Example 14.3 - Courter Corporation (5 of 8)

[Table 14.6 Continued]

Activity	Duration (Weeks)	Predecessors	ES	EF	LS	LF
G*	5	F	18	23	18	23
H	4	A	2	6	8	12
I	10	H	6	16	12	22
J	3	I	16	19	22	25
K*	2	G	23	25	23	25

*Critical activity.

Example 14.3 - Courter Corporation (6 of 8)

Step 1: List all network paths and their current lengths.

Table 14.7 Network Paths for Project*

Path	Length
A–B–E–F–G–K	25**
A–C–D–F–G–K	24
A–H–I–J	19

*Activities that can be crashed appear in color.

**Critical path.

Example 14.3 - Courter Corporation (7 of 8)

Step 2: Focus on the critical path or paths. Working one period at a time, choose the activity(s) that will shorten all critical paths at the least cost.

Activity B – shorten 1 week at a cost of $500

Table 14.8 Updated Network Path Lengths

blank	Length	blank	Length after Crashing B
A–B–E–F–G–K	25*	→	24*
A–C–D–F–G–K	24	→	24*
A–H–I–J	19	→	19
Crashing cost: $500.	blank	blank	blank

Example 14.3 - Courter Corporation (8 of 8)

Step 3: Recalculate the lengths of all paths and repeat step 2 until the target project completion time is reached or until all options have been exhausted.

Activity G - shorten 1 week at a cost of $700

Table 14.9 Final Results of Crashing Activities B and G

Blank	Original Length	blank	Length after Crashing B	blank	Length after Crashing G
A–B–E–F–G–K	25*	→	24*	→	23*
A–C–D–F–G–K	24	→	24*	→	23*
A–H–I–J	19	→	19	→	19
Crashing cost: $500 + $700 = $1,200.	Blank	Blank	Blank	Blank	Blank

Project Management Software (1 of 3)

Project Management Software

Microsoft Project

Figure 14.7 Entering the Gina300 Project into Microsoft Project

Project Management Software (2 of 3)

Project Management Software

Microsoft Project

Figure 14.8 Computer-Generated Gantt Chart for the Gina3000 Project

Project Management Software (3 of 3)

Project Management Software

Microsoft Project

Figure 14.9 Computer-Generated Network Diagram for the Gina3000 Project

PMI and the Project Management Body of Knowledge (PMBOK®)

PMI (Project Management Institute)

Offers education and certification

Sponsors conferences, research, special interest groups

Publishes Guide to the Project Management Body of Knowledge (PMBOK®)

PMBOK®

Part I: Various business processes that organizations follow in carrying out projects.

Part II: Nine knowledge areas applicable to nearly all projects.

Managing Projects Case Study

Viva Roma!

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