Online quiz for 6/14/19

Project Management (Chapter 16)

Production & Operations Management INFO 335-71

Week 4

Learning Objectives

 Describe project management objectives

 Describe the project life cycle

 Diagram networks of project activities

 Estimate the completion time of a project

 Compute the probability of completing a project by a specific time

 Determine how to reduce the length of a project effectively

 Describe the critical chain approach to project management

Project Management Applications

 What is a project? • Any unique endeavor with specific objectives • With multiple activities • With defined precedent relationships • With a specific time period for completion

 Examples • A major event like a wedding • Any construction project • Designing a political campaign

Project Life Cycle

 Conception: identify the need

 Feasibility analysis or study: costs benefits, and risks

 Planning: who, how long, what to do?

 Execution: doing the project

 Termination: ending the project

Network Planning Techniques

 Program Evaluation & Review Technique (PERT):

• Developed to manage the Polaris missile project • Used to determine a project’s planned completion

date and identify the critical path

 Critical Path Method (CPM):

• Developed to coordinate maintenance projects in the chemical industry

• An algorithm for scheduling a set of project activities; identification of the critical path/s (longest)

Network Planning Techniques – Activity Time Estimates

Probabilistic

 Process that uses optimistic, most likely, and pessimistic time estimates

 PERT

 Use when there is uncertainty about duration • Example: bad weather,

delays, unexpected labor issues

Deterministic

 Assumes the activity duration is a known certainty

 CPM

 Use when reliable estimates can be made based on similar activities in the past

PERT and CPM Benefits

 Graphically display the precedence

relationships & sequence of activities

 Estimate the project’s duration

 Identify critical activities that cannot be delayed

without delaying the project

 Estimate the amount of slack associated with

non-critical activities

Network Diagrams

 Activity-on-Node (AON): • Uses nodes to represent the activity • Uses arrows to represent precedence relationships

Project Management and Network Planning – 4 Steps

1. Describe the Project a. Objective, project end date

b. Define project activities (resource requirements such as labor, equipment, funds) and precedence relationships

2. Diagram the Network

3. Estimate Project’s Completion Time

4. Monitor Project’s Progression a. Quality, audit, measurements

Step 1-Define the Project: Cables By Us is bringing a new product on line to be manufactured in their current facility in existing space. The owners have identified 11 activities and their precedence relationships. Develop an AON for the project.

Activity Description Immediate

Predecessor Duration (weeks)

A Develop product specifications None 4 B Design manufacturing process A 6 C Source & purchase materials A 3 D Source & purchase tooling & equipment B 6 E Receive & install tooling & equipment D 14 F Receive materials C 5 G Pilot production run E & F 2 H Evaluate product design G 2 I Evaluate process performance G 3 J Write documentation report H & I 4 K Transition to manufacturing J 2

Step 2- Diagram the Network

Cable By Us

Activity Description

A Develop product specifications B Design manufacturing process C Source & purchase materials D Source & purchase tooling & equipment E Receive & install tooling & equipment F Receive materials G Pilot production run H Evaluate product design I Evaluate process performance J Write documentation report K Transition to manufacturing

Step 3 (a) - Estimate Project’s Completion Time

Add Deterministic Time Estimates and Connected Paths

Step 3 (a) - Estimate Project’s Completion Time – cont’d

 The longest path (ABDEGIJK) limits the project’s duration (project cannot finish in less time than its longest path)

 ABDEGIJK is the project’s critical path

Paths Path duration ABDEGHJK 40 ABDEGIJK 41 ACFGHJK 22 ACFGIJK 23

Activity

A Develop product specifications B Design manufacturing process C Source & purchase materials D Source & purchase tooling & equipment E Receive & install tooling & equipment F Receive materials G Pilot production run H Evaluate product design I Evaluate process performance J Write documentation report K Transition to manufacturing

Some Network Definitions

 All activities on the critical path have zero slack  Slack defines how long non-critical activities can be

delayed without delaying the project  Slack = the activity’s late finish minus its early finish (or

its late start minus its early start)  Earliest Start (ES) = the earliest finish of the immediately

preceding activity  Earliest Finish (EF) = is the ES plus the activity time  Latest Start (LS) and Latest Finish (LF) = the latest an

activity can start (LS) or finish (LF) without delaying the project completion

ES, EF Network (Deterministic)

LS, LF Network (Deterministic)

Delay H = LS – ES = 33 – 32 = 1 Week = LF

Calculating Slack

Step 3 (b) - Estimate Project’s Completion Time

 Using Probabilistic Time Estimates • Beta Probability Distribution model to calculate; definite

end points; weighted average for each activity

Step 3 (b) - Estimate Project’s Completion Time – cont’d

Ac tiv ity O p tim is tic

tim e M o st lik e ly

tim e P e s s im is tic

tim e E x p e c te d

tim e A 2 4 6 4 B 3 7 1 0 6 .8 3 C 2 3 5 3 .1 7 D 4 7 9 6 .8 3 E 1 2 1 6 2 0 1 6 F 2 5 8 5 G 2 2 2 2 H 2 3 4 3 I 2 3 5 3 .1 7 J 2 4 6 4 K 2 2 2 2

  6

cpessimistilikelymost 4optimistic timeExpected

 

Best Case Worst Case

Step 3 (b) - Estimate Project’s Completion Time – cont’d

Network Diagram with Probabilistic expected activity times

Step 3 (b) - Estimate Project’s Completion Time – cont’d

 Estimated Path Durations through the Network

 ABDEGIJK is the expected critical path & the project has an expected duration of 44.83 weeks

Activities on paths Expected duration ABDEGHJK 44.66 ABDEGIJK 44.83 ACFGHJK 23.17 ACFGIJK 23.34

ES, EF Network (Probabilistic)

Gantt Chart - Each Activity Finished at the ES Date

LS, LF Network (Probabilistic)

Gantt Chart - Each Activity Finished at the LS Date

Project Is to Be Completed in 44.83 Weeks

Step 4 – Monitor The Project’s Progression

 Project Manager is responsible for the project’s success/failures

 Quality, Audits to monitor critical path activities, delays, slack, processes

 Use Measurements to help guide next steps, actions, improvements

Estimating The Probability of Completion Dates

 Using probabilistic time estimates offers the advantage of predicting the probability of project completion dates

 We already calculated expected time for each activity using three time estimates; Now we need to calculate the variance for each activity

 The variance of the beta probability distribution is:

p=pessimistic activity time estimate

o=optimistic activity time estimate 2

2

6

op σ 

 

   



Project Activity Variance

Activity Optimistic Most Likely Pessimistic Variance

A 2 4 6 0.44

B 3 7 10 1.36

C 2 3 5 0.25

D 4 7 9 0.69

E 12 16 20 1.78

F 2 5 8 1.00

G 2 2 2 0.00

H 2 3 4 0.11

I 2 3 5 0.25

J 2 4 6 0.44

K 2 2 2 0.00

2σ 

Variances of Each Path Through The Network

Path Number

Activities on Path

Path Variance (weeks)

1 A,B,D,E,G,H,J,k 4.82

2 A,B,D,E,G,I,J,K 4.96

3 A,C,F,G,H,J,K 2.24

4 A,C,F,G,I,J,K 2.38

Calculating Probability of Completing a Project in Less Than a Specified Time

 When you know: • The expected completion time • Its variance

 You can calculate the probability of completing the project in “X” weeks with the following formula:

Where DT = the specified completion date EFPath = the expected completion time of the path

 

  

  

 

2 Pσ

EFD

time standard path

time expected pathtime specified z

PT

path of varianceσ 2Path 

Calculating Probability of Completing a Project in Less Than a Specified Time – cont’d

Example – 48 weeks  Use the z values in Appendix B to determine probabilities

 e.g. probability for path 1 is

Path Number

Activities on Path

Path Variance (weeks)

z-value Probability of Completion

1 A,B,D,E,G,H,J,k 4.82 1.5216 0.9357

2 A,B,D,E,G,I,J,K 4.96 1.4215 0.9222

3 A,C,F,G,H,J,K 2.24 16.5898 1.000

4 A,C,F,G,I,J,K 2.38 15.9847 1.000

1.52 4.82

weeks 44.66weeks 48 z 



  

  

Expected duration

0.00 0.0 0.5000 0.1 0.5398 0.2 0.5793 0.3 0.6179 0.4 0.6554 0.5 0.6915 0.6 0.7257 0.7 0.7580 0.8 0.7881 0.9 0.8159 1.0 0.8413 1.1 0.8643 1.2 0.8849 1.3 0.9032 1.4 0.9192 1.5 0.9332 1.6 0.9452 1.7 0.9554 1.8 0.9641 1.9 0.9713 2.0 0.9772 2.1 0.9821 2.2 0.9861 2.3 0.9893 2.4 0.9918 2.5 0.9938 2.6 0.9953 2.7 0.9965 2.8 0.9974 2.9 0.9981 3.0 0.9987

Reducing Project Completion Time

 Project completion times may need to be shortened because: • Different deadlines • Penalty clauses • Need to put resources on a new project • Promised completion dates

 Reduced project completion time is “crashing”

Reducing Project Completion Time – cont'd

 Crashing a project needs to balance • Shorten a project duration • Cost to shorten the project duration

 Crashing a project requires you to know • Normal activity time/costs • Crash time/costs of each activity • Activities on the critical path

Crash cost/duration = (crash cost-normal cost)/(normal time – crash time)

Reducing Project Completion Time With Crashing

Activity Normal Time (wk)

Normal Cost ($)

Crash Time

Crash Cost ($)

Max. weeks of reduction

Reduce cost per week

A 4 8,000 3 11,000 1 3,000

B 6 30,000 5 35,000 1 5,000

C 3 6,000 3 6,000 0 0

D 6 24,000 4 28,000 2 2,000

E 14 60,000 12 72,000 2 6,000

F 5 5,000 4 6,500 1 1500

G 2 6,000 2 6,000 0 0

H 2 4,000 2 4,000 0 0

I 3 4,000 2 5,000 1 1,000

J 4 4,000 2 6,400 2 1,200

K 2 5,000 2 5,000 0 0

Normal Time – Crash Time

(Crash Cost – Normal Cost) / (Normal Time – Crash Time)

Crashing Example: Suppose the Cables By Us project manager wants to reduce a product project from 41 to 36 weeks.

 Crashing Costs are considered to be linear  Look to crash activities on the critical path  Crash the least expensive activities on the critical

path first (based on cost per week) • Crash activity I from 3 weeks to 2 weeks $1000 • Crash activity J from 4 weeks to 2 weeks $2400 • Crash activity D from 6 weeks to 4 weeks $4000 • Recommend Crash Cost $7400

Question: Will crashing 5 weeks return more in benefits than it costs?

Crashed Network Diagram

The Critical Chain Approach

 Focuses on project due dates rather than on individual activities and the following realities: • Project time estimates are uncertain > add safety time • Multi-levels of organization may add additional time to be

“safe” • Individual activity buffers may be wasted on lower-priority

activities • Best approach > place project safety buffer at the end

Original critical path

Activity A Activity B Activity C Activity D Activity E

Critical path with project buffer

Activity A Activity B Activity C Activity D Activity E Project Buffer