Operation Management Online quiz

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Project Management

Chapter 8

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Learning Objectives

Define the term project, list the steps involved in project management, and explain the role of the project manager.

Describe various project management tools and techniques, such as work breakdown structure, critical path method, program evaluation and review technique, cost and time tradeoff, and resource management.

Understand how to execute project successfully and how to avoid risks and failure.

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Elements of Project Management

To identify the elements of project management

we need to answer two questions:

What is a project?

What is Project Management?

And then we need to also consider the role of:

The Project Manager

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What is a Project?

Project: a set of interrelated activities necessary to achieve established goals using a specified amount of time, budget, and resources
The primary characteristics are:

A well-defined goal or objective

Composed of a set of interrelated activities

A specified beginning and ending time

Specified resource and personnel requirements

A specified budget

Uniqueness

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Supplementary
Characteristics for Projects

Projects generally have or include:

Pre-specified deliverables after completion

Pre-established limits and exclusions

Specific intermediate goals or performance milestones.

An element of risk

Teams made up of several individuals who come from different departments or functional areas or who have unique skills

Team members work are working on multiple projects at the same time

Source: © Image Source/Corbis

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Examples of
Operations Management Projects

The development of new product and service offerings such as Nintendo Wii, Sony Playstation, and Microsoft-X-Box.
Quality improvement projects such as implementation of Six Sigma projects at a large service organization like American Express.
Preparation for ISO9000 or ISO14000 certifications.

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What is Product Management

Project management: the application of the knowledge, skills, tools, and techniques necessary to successfully complete a project.
According to the Project Management Institute (www.pmi.org), the body of knowledge of project management can be divided into five categories:

initiation

planning

execution

control

closure

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Project Initiation

During the project initiation phase, a business problem or opportunity is identified, a solution is identified and a project team is established.
The project manager is ultimately responsible for the successful execution of the project.
The Project Management Institution recommends that project managers need to gain expertise in areas such as: information integrations, scope, time, cost, quality, human resources, communications, risk, and procurement.

Source: © Image Source/Corbis

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Discussion Starter

What are Project Champions?

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Project Planning

Involves the creation of a number of planning documents such as:

Project plan

Resource plan

Financial plan

Quality plans

Communications plan

Risk plan

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Project Execution

Involves the actual completion of all activities that are part of the project.
Requires the project manager to start constructing the deliverables.
The deliverables can be sequenced in series so that neither the project team nor the recipient is overburdened by them.

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Project Control

Is the real-time assessment of the execution of a planned project
Requires time, cost, quality, resource, risk, and change management skills
Hardest job for a project manager

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Project Closure

At the conclusion of all project activities and after submission of the required deliverables, a project is formally closed.
Conducting a critical assessment of all project phases that went well and those that did not allows the organization to learn and to improve the execution of the next project.

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The Project Manager

Project manager: the person responsible for delivering the goals of a project
Project time: the amount of time available to complete a project
Project cost: the budgeted amount available for the project
Project scope: the activities that must be completed to achieve a project’s end goal

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Figure 8.1: Three Interrelated
Constraints in Project Management

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Project Management
Tools and Techniques

The discipline of project management has available a number of tools and procedures that enable the project team to organize its work to meet the constraints:

Work Breakdown Structure

Precedence Relationship and Time Estimates

Gantt Chart

Network Diagram

Critical Path Method (CPM)

Cost and Time Tradeoff Analysis

Program Evaluation and Review Technique (PERT)

Resource Management

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Work Breakdown Structure

Work breakdown structure (WBS): an approach that defines a project in terms of its subprojects, tasks, and activities

Most fundamental technique for designing and organizing

Activity: the smallest work package that can be assigned to a single worker or a team
It is essential that care is taken to develop a realistic work breakdown structure.

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Figure 8.2: Work Breakdown Structure

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Precedence Relationship
and Time Estimates

Precedence relationship analysis: identification of the relationships and the sequence of activities within a project
Great care is taken to estimate the approximate completion time for each activity.
The project schedule, cost, and resource requirements depend on the precedence relationships and time estimates for individual tasks.

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Gantt Chart

Gantt chart: a special type of horizontal bar chart used to display the schedule for an entire project
Named after Henry Gantt, who originally developed the chart in the 1910s.
A Gantt chart with different color codes can be used to track performance while the project is in progress.

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Figure 8.3: An
Example of a Gantt Chart

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Network Diagram

Network diagram: a diagram with arrows and nodes (circles) created to display a sequence of activities within a project
Activity on node (AON) approach: a network diagram that shows each activity as a circle (or a node) and connects the activities with arrows
Activity on arrow (AOA) convention: a network diagram in which each activity is represented by an arrow, and the nodes are used to show the beginning and end points

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Figure 8.5: Activity on Node (AON)
and Activity on Arrow (AOA) Conventions
for Representing Network Diagrams

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Figure 8.7: AON Network Diagram
for Sunny Beach Resort Project

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Critical Path Method

Critical path method: an algorithm for scheduling activities within a project for the fastest and most efficient execution
Critical path: the path within a project that takes the longest time to complete

Dictates the project completion time

a.k.a.: the bottleneck path or the binding constraint

Critical activities: the project activities making up a critical path
Slack: the amount of flexibility in scheduling an activity within a project

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Identifying the Critical Path

The algorithm involves calculating four parameters

for each activity:

Early start time (ES): the earliest time at which an activity can start, considering the beginning and ending for each of the preceding activities

Early finish time (EF): the sum of the early start time (ES) and the time required to complete the activity

Late state time (LS): the latest time at which an activity can start, considering all the precedence relationships, without delaying the completion time for the project

Late finish time (LF): the sum of the late start time and the time required to complete the activity

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Figure 8.9: Convention for Displaying the Earliest and Latest Start and Finish Times

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Cost and Time Tradeoff Analysis

Sometimes the most efficient schedule is not sufficient for meeting customer needs.

The scope of the project may need to be changed or additional resources may need to be assigned to speed up the project.

If the scope of the project is changed, the project team can reevaluate the schedule based on the new guidelines using the critical path method.
If additional resources are assigned to speed up the project schedule, a cost and time tradeoff analysis (crashing) is conducted.
Crashing: an approach for identifying the lowest-cost approach for reducing the project duration

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Table 8.2: Sunny Beach Resort: Activity Relationships and Time Estimates

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Figure 8.17: Additional
Project Cost Versus Duration

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Program Evaluation
and Review Technique (PERT)

Program evaluation and review technique: a technique for addressing the impact of uncertainties in activity time estimates on the duration of the entire project
In a project schedule, different estimates for activity times are developed:

Optimistic time (to): the minimum possible time required to complete an activity, assuming that everything proceeds better than is normally expected

Pessimistic time (tp): the maximum possible time required to complete ac activity, assuming that everything proceeds at the slowest possible pace

Most likely time (tm): the best estimate of the time required to accomplish a task assuming that everything proceeds normally

Expected time (te): the best estimate of the time required to accomplish an activity considering the potential impact
of to, tm, and tp

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Figure 8.18: Potential
Distributions of Activity Times

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Resource Management

Two commonly used techniques are:

Resource breakdown structure (RBS): a standardized list of personnel required to complete various activities in a project

Resource leveling: an approach to reduce the amount of fluctuations in day-to-day resource requirements within an organization

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Figure 8.26: Resource Requirements
in Multiproject Environments

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Project Management Software

A large number of concepts, tools and techniques for project management have been introduced since the 1950s, and their use has become quite widespread in recent years.
Several reasons for this increase in the use of project management techniques:

Globally diverse workforce

Multi-project environments

Availability of user-friendly software

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Success Factors
in Project Management

Why Do Projects Fail?
Project Risk Management
Why Do Projects Succeed?

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Project Risk Management

Even with careful planning, it is not possible to anticipate everything that can put a project’s scope, schedule, or budget at risk.
A careful manager develops plans for managing various risks associated with the projects.
Four categories of risks:

Financial Resource Risk

Human Resource Risk

Supply Risk

Quality Risk

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Risk Assessment Plan

Step 1: Identify problems (and map them).

Problems are classified according to:

Severity: What percentage of the project’s scope will be affected by a problem?

Probability: What are the chances that a specific problem will occur?

Timing: At what point in the project is the specific problem likely to appear?

Dynamic risk: As the project proceeds, will the probability of the problem occurrence increase, decrease, or stay constant?

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Table 8.9: Project Risk Map Template

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Risk Assessment Plan continued

Step 2: Analyze each potential problem.

The project manager should quantify the impact of each potential problem such as time delays or cost overruns.

Step 3: Once the risks are presented on the same scale, develop a prioritization scheme.

Step 4: Develop a contingency plan.

Done by the project team

Step 5: Develop a potential upside for the project.

Done by the project manager

Step 6: Assign team members the responsibility for monitoring the signs of each potential problem.

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Risk Register

Projects Teams will define the various risks and document these issues.
Each risk will have a “potential solution.”
One owner will be assigned the risk.
Living document – dynamic – will change

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Why Do Projects Succeed?

Clearly Defined Goals

Is there a clear and written-down objective for the project?

Are the main tasks structured?

Has the scope of the project been agreed upon?

Does the team know and agree with the goals?

Are there clear milestones along the way?

Project Manager Ability

Is the project manager skilled and experienced?

Does the project manager have a plan and a budget?

Does the project manager have technical knowledge in the area of the project?

Does the project manager have leadership skills?

Can the project manager motivate the team?

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Why Do Projects Succeed?

Team Member Skills

Do we know what skills are required on this project?

Does the team have all these skills?

Is there a training program for team members?

Is there a range of skills and experience on the project?

Are people there because of what they bring to the project and not due to their position in the organization?

Top Management Support

Is there support from top management for the project?

Does the project have a champion in top management?

Have adequate resources been allocated to the project?

Does top management have a stake in the outcome of the project?

Does the project fit with organization objectives?

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Why Do Projects Succeed?

Project Planning

Is there a clear method for achieving the project?

Has a plan for the project life been prepared from this method?

Is there good short-term planning?

Is progress measured against plan?

Is the plan adjusted to match progress?

Communication

Are there clear channels of communication to all parties on the project?

Can team members discuss issues openly?

Can team members communicate their opinions on decisions?

Do team members get feedback on performance?

Do team members trust each other enough to communicate freely at all times?

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Why Do Projects Succeed?

User Involvement

Do we know the end users of the project?

Have the end users been involved in setting the project outcomes?

Is it easy for end users to get involved in the project?

Do the end users give feedback on progress?

Do the end users have ownership of the solution?

Commitment of Team

Are team members behind the goals of the project?

Do the team members own the project outcome?

Are team members involved in decision making?

Can team members make suggestions about improving and changing the project?

Do team members go beyond their job description for the good of the project?

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Why Do Projects Succeed?

Control Systems

Does the project have a control system?

Do we check planned time and cost against actual duration and expenditure?

Are checks carried out early enough to detect problems and correct them?

Do we give feedback on progress to the team?

Do we check that action on feedback is effective?

Risk Management

Have key risks on the project been identified?

Has the effect of each risk been measured?

Have responses been decided for key risks?

Have action plans been prepared for each response?

Does the team have a plan for managing unexpected risks?