Chapter 17: Learning Objectives

Chapter 17: Learning ObjectivesYou should be able to:

1. Discuss the behavioral aspects of projects in terms of project personnel and the project manager

2. Explain the nature and importance of a work breakdown structure in project management

3. Give a general description of PERT/CPM techniques4. Construct simple network diagrams5. List the kinds of information that a PERT or CPM analysis can

provide6. Analyze networks with deterministic times7. Analyze networks with probabilistic times8. Describe activity ‘crashing’ and solve typical problems

17-1

ProjectsProjects

Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame

Examples:The Olympic GamesProducing a movieSoftware developmentProduct developmentERP implementation

17-2

Project Life Cycle

17-3

Work Breakdown Structure (WBS)WBS

A hierarchical listing of what must be done during a projectEstablishes a logical framework for identifying the

required activities for the project1. Identify the major elements of the project2. Identify the major supporting activities for each

of the major elements3. Break down each major supporting activity into a

list of the activities that will be needed to accomplish it

17-4

WBS

17-5

Gantt Chart

17-6

PERT and CPMPERT (program evaluation and review

technique) and CPM (critical path method) are two techniques used to manage large-scale projects

By using PERT or CPM Managers can obtain:1. A graphical display of project activities2. An estimate of how long the project will take3. An indication of which activities are most critical to

timely project completion4. An indication of how long any activity can be delayed

without delaying the project

17-7

Network DiagramNetwork diagram

Diagram of project activities that shows sequential relationships by use of arrows and nodes

Activity on arrow (AOA)Network diagram convention in which arrows designate

activities Activity on node (AON)

Network convention in which nodes designate activities Activities

Project steps that consume resources and/or time Events

The starting and finishing of activities

17-8

AON ConventionActivity on Activity Meaning Node (AON)

A comes before B, which comes before C.(a) A B C

A and B must both be completed before C can start.(b)

AC

B

B and C cannot begin until A is completed.(c)B

AC 17-9

Activity on Activity Meaning Node (AON)

C and D cannot begin until both A and B are completed.(d)

A

B

C

D

C cannot begin until both A and B are completed; D cannot begin until B is completed. A dummy activity is introduced in AOA.

(e)A

B

C

D

AON Convention

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B and C cannot begin until A is completed. D cannot begin until both B and C are completed. A dummy activity is again introduced in AOA.

(f)A

C

DB

Activity on Activity Meaning Node (AON)

AON Convention

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AON Example

Activity DescriptionImmediate

PredecessorsA Build internal components —B Modify roof and floor —C Construct collection stack AD Pour concrete and install frame A, BE Build high-temperature burner CF Install pollution control system CG Install air pollution device D, EH Inspect and test F, G

Project Activities and Predecessors

17-12

A

Start

BStart Activity

Activity A(Build Internal Components)

Activity B(Modify Roof and Floor)

AON Network

17-13

C

D

A

Start

B

Activity A Precedes Activity C

Activities A and B Precede Activity D

AON Network

17-14

G

E

F

H

CA

Start

DB

Arrows Show Precedence Relationships

AON Network

17-15

Deterministic Time EstimatesDeterministic

Time estimates that are fairly certainProbabilistic

Time estimates that allow for variation

17-16

Determining Project Duration

Activity Description Time (weeks)A Build internal components 2B Modify roof and floor 3C Construct collection stack 2D Pour concrete and install frame 4E Build high-temperature burner 4F Install pollution control system 3G Install air pollution device 5H Inspect and test 2

Total Time (weeks) 25

17-17

Determining the Project Duration

Critical Path

Path Path durationA-C-F-H 2 + 2 + 3 + 2 = 9A-C-E-G-H 2 + 2 + 4 + 5 + 2 =

15A-D-G-H 2 + 4 + 5 + 2 = 13B-D-G-H 3 + 4 + 5 + 2 = 14Critical path = Longest path A-C-E-G-HProject duration = 15 weeks

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Early Start, Early FinishFinding ES and EF involves a forward pass

through the network diagram Early start (ES)

The earliest time an activity can startAssumes all preceding activities start as early as possible

For nodes with one entering arrow ES = EF of the entering arrow

For activities leaving nodes with multiple entering arrows ES = the largest of the largest entering EF

Early finish (EF)The earliest time an activity can finish

EF = ES + t

17-19

Late Start, Late FinishFinding LS and LF involves a backward pass

through the network diagram Late Start (LS)

The latest time the activity can start and not delay the project The latest starting time for each activity is equal to its latest finishing

time minus its expected duration: LS = LF - t

Late Finish (LF)The latest time the activity can finish and not delay the project

For nodes with one leaving arrow, LF for nodes entering that node equals the LS of the leaving arrow

For nodes with multiple leaving arrows, LF for arrows entering node equals the smallest of the leaving arrows

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Slack and the Critical PathSlack can be computed one of two ways:

Slack = LS – ESSlack = LF – EF

Critical pathThe critical path is indicated by the activities

with zero slack

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Determining the Project Schedule

Perform a Critical Path Analysis

A

Activity Name or Symbol

Earliest Start ES

Earliest FinishEF

Latest Start

LS Latest Finish

LF

Activity Duration

2

17-22

Forward PassBegin at starting event and work forward

Earliest Start Time Rule:

If an activity has only a single immediate predecessor, its ES equals the EF of the predecessor

If an activity has multiple immediate predecessors, its ES is the maximum of all the EF values of its predecessors

ES = Max {EF of all immediate predecessors}

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Forward Pass

Begin at starting event and work forwardEarliest Finish Time Rule:

The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time

EF = ES + Activity time

17-24

Start

0

0

ES

0

EF = ES + Activity time

Forward Pass

17-25

Start0

0

0

A

2

2

EF of A = ES of A + 2

0

ESof A

Forward Pass

17-26

B

3

Start0

0

0

A

2

20

3

EF of B = ES of B + 3

0

ESof B

Forward Pass

17-27

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

Forward Pass

17-28

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

D

4

73= Max (2, 3)

Forward Pass

17-29

D

4

3 7

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

Forward Pass

17-30

E

4

F

3

G

5

H

2

4 8 13 15

4

8 13

7

D

4

3 7

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

Forward Pass

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Backward Pass

Begin with the last event and work backwards

Latest Finish Time Rule:

If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity that immediately follows it

If an activity is an immediate predecessor to more than one activity, its LF is the minimum of all LS values of all activities that immediately follow it

LF = Min {LS of all immediate following activities}17-32

Backward Pass

Begin with the last event and work backwards

Latest Start Time Rule:

The latest start time (LS) of an activity is the difference of its latest finish time (LF) and its activity time

LS = LF – Activity time

17-33

E

4

F

3

G

5

H

2

4 8 13 15

4

8 13

7

D

4

3 7

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

LF = EF of Project

1513

LS = LF – Activity time

Backward Pass

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E

4

F

3

G

5

H

2

4 8 13 15

4

8 13

7

13 15

D

4

3 7

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

LF = Min(LS of following activity)

10 13

Backward Pass

17-35

E

4

F

3

G

5

H

2

4 8 13 15

4

8 13

7

13 15

10 13

8 13

4 8

D

4

3 7

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

LF = Min(4, 10)

42

Backward Pass

17-36

E

4

F

3

G

5

H

2

4 8 13 15

4

8 13

7

13 15

10 13

8 13

4 8

D

4

3 7

C

2

2 4

B

3

0 3

Start0

0

0

A

2

20

42

84

20

41

00

Backward Pass

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Computing Slack Time

After computing the ES, EF, LS, and LF times for all activities, compute the slack or free time for each activity

Slack is the length of time an activity can be delayed without delaying the entire project

Slack = LS – ES or Slack = LF – EF

17-38

Computing Slack Time

Earliest Earliest Latest Latest OnStart Finish Start Finish Slack Critical

Activity ES EF LS LF LS – ES Path

A 0 2 0 2 0 YesB 0 3 1 4 1 NoC 2 4 2 4 0 YesD 3 7 4 8 1 NoE 4 8 4 8 0 YesF 4 7 10 13 6 NoG 8 13 8 13 0 YesH 13 15 13 15 0 Yes

17-39

Using Slack TimesKnowledge of slack times provides managers

with information for planning allocation of scarce resources Control efforts will be directed toward those activities that

might be most susceptible to delaying the project Activity slack times are based on the assumption that all

of the activities on the same path will be started as early as possible and not exceed their expected time

If two activities are on the same path and have the same slack, this will be the total slack available to both

17-40

Probabilistic Time EstimatesThe beta distribution is generally used to

describe the inherent variability in time estimates

The probabilistic approach involves three time estimates: Optimistic time, (to)

The length of time required under optimal conditions Pessimistic time, (tp)

The length of time required under the worst conditions

Most likely time, (tm)The most probable length of time required

17-41

Probabilistic Time EstimatesThe expected time, te ,for an activity is a

weighted average of the three time estimates:

The expected duration of a path is equal to the sum of the expected times of the activities on that path:

64 pmo

e

tttt

path on the activities of timesexpected ofmeanPath

17-42

Determining Path Probabilities

deviation standardPath meanPath - timeSpecified

z

17-43

Project Completion Time A project is not complete until all project activities are

complete It is risky to only consider the critical path when assessing the

probability of completing a project within a specified time. To determine the probability of completing the project within a particular

time frameCalculate the probability that each path in the project will be

completed within the specified timeMultiply these probabilities

The result is the probability that the project will be completed within the specified time

17-44

Probabilistic Time EstimatesThe standard deviation of each activity’s time is

estimated as one-sixth of the difference between the pessimistic and optimistic time estimates. The variance is the square of the standard deviation:

Standard deviation of the expected time for the path

22

6

op tt

pathon activities of Variancespath

17-45

Computing Variance

Most ExpectedOptimistic Likely Pessimistic Time Variance

Activity to tm tp t = (to + 4 tm + tp)/6 [(tp – to)/6]2

A 1 2 3 2 4/36B 2 3 4 3 4/36C 1 2 3 2 4/36D 2 4 6 4 16/36E 1 4 7 4 36/36F 1 2 9 3 64/36G 3 4 11 5 64/36H 1 2 3 2 4/36

17-46

Knowledge of Path StatisticsKnowledge of expected path times and their

standard deviations enables managers to compute probabilistic estimates about project completion such as:The probability that the project will be

completed by a certain timeThe probability that the project will take

longer than its expected completion time

17-47

Path variance is computed by summing the variances of activities on the path

2 = Project variance

= (variances of activities on the path)

p

Computing Variance

17-48

Variance of critical path2 = 4/36 + 4/36 + 36/36 + 64/36 + 4/36

= 112/36 = 3.1111Standard deviation of critical pathp = Variance of critical path

= 3.1111 = 1.7638 weeks

p

Computing Variance

17-49

Probability of Project Completion

Note:

Total project completion times follow a normal probability distribution

Activity times are statistically independent

17-50

Probability of Project Completion

Standard deviation = 1.7638 weeks

15 Weeks

(Expected Completion Time)

17-51

Probability of Project CompletionWhat is the probability this project can be completed on or before the 16 week deadline?

Z = TM = Path mean completion time

T = Due date

Z = (16 – 15)/1.7638

= 0.57

Where Z is the number of standard

deviations the due date or target date lies from the mean or expected

date

p

MT - T

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Probability of Project Completion

Time

Probability(T ≤ 16 weeks)is 0.7157

0.57 Standard deviations

15 16Weeks Weeks

Probability(T > 16 weeks)is 1 – 0.7157 = 0.2843

17-53

Project Completion for given confidenceDetermine a due date for the project completion time that will have a 99% probability of meeting.

Due date = TE + Z p

17-54

Determining Project Completion Time

Probability of 0.01

ZFrom Appendix I

Probability of 0.99

2.325 Standard deviations

0 2.325

17-55

Determining Project Completion Time

Probability of 0.01

ZFrom Appendix I

Probability of 0.99

2.325 Standard deviations

0 2.325

Due date (T) = TM + z p

17-56

Determining Project Completion Time

Probability of 0.01

ZFrom Appendix I

Probability of 0.99

2.325 Standard deviations

0 2.325

Due date (T) = 15 + 2.325 (1.7638)

17-57

Determining Project Completion Time

Probability of 0.01

ZFrom Appendix I

Probability of 0.99

2.325 Standard deviations

0 2.325

Due date (T) = 19.1 weeks

17-58

Variability of Completion Time for Noncritical Paths

Variability of times for activities on noncritical paths must be considered when finding the probability of finishing in a specified time

Variation in noncritical activity may cause change in critical path

17-59

What Project Management Has Provided So Far1. The project’s expected

completion time is 15 weeks2. There is a 71.57% chance the

equipment will be in place by the 16 week deadline

3. Five activities (A, C, E, G, and H) are on the critical path

4. Three activities (B, D, F) are not on the critical path and have slack time

5. A detailed schedule is available17-60

Budget ControlBudget control is an important aspect of

project managementCosts can exceed budget

Overly optimistic time estimatesUnforeseen events

Unless corrective action is taken, serious cost overruns can occur

17-61

Time-Cost Trade-OffsActivity time estimates are made for some

given level of resourcesIt may be possible to reduce the duration of

a project by injecting additional resources Motivations:

To avoid late penaltiesMonetary incentivesFree resources for use on other projects

17-62

Time-Cost Trade-Offs: CrashingCrashing

Shortening activity durationsTypically, involves the use of additional funds to support

additional personnel or more efficient equipment, and the relaxing of some work specifications

The project duration may be shortened by increasing direct expenses, thereby realizing savings in indirect project costs

17-63

Crashing DecisionsTo make decisions concerning crashing requires

information about:1. Regular time and crash time estimates for each

activity2. Regular cost and crash cost estimates for each activity3. A list of activities that are on the critical path

Critical path activities are potential candidates for crashingCrashing non-critical path activities would not have an impact

on overall project duration

17-64

Crashing: ProcedureGeneral procedure:

1. Crash the project one period at a time2. Crash the least expensive activity that is on the

critical path3. When there are multiple critical paths, find the sum of

crashing the least expensive activity on each critical path

If two or more critical paths share common activities, compare the least expensive cost of crashing a common activity shared by critical paths with the sum for the separate critical paths

17-65

Crashing Activities

17-66

PERT: AdvantagesAmong the most useful features of

PERT:1.It forces the manager to organize and quantify

available information and to identify where additional information is needed

2.It provides the a graphic display of the project and its major activities

3.It identifiesa. Activities that should be closely watchedb. Activities that have slack time

17-67

Sources of ErrorPotential sources of error:

1. The project network may be incomplete2. Precedence relationships may not be correctly

expressed3. Time estimates may be inaccurate4. There may be a tendency to focus on critical path

activities to the exclusion of other important project activities

5. Major risk events may not be on the critical path

17-68

Project Management SoftwareTechnology has benefited project management

CADTo produce updated prototypes on construction and product-

development projects Communication software

Helps to keep project members in close contactFacilitates remote viewing of projects

Project management softwareSpecialized software used to help manage projects

Assign resources Compare project plan versions Evaluate changes Track performance

17-69

Project Management Software Advantages

Advantages include: Imposes a methodology and common project

management terminology Provides a logical planning structure May enhance communication among team members Can flag the occurrence of constraint violations Automatically formats reports Can generate multiple levels of summary and detail

reports Enables “what if” scenarios Can generate a variety of chart types

17-70

Risk ManagementRisks are an inherent part of project management

Risks relate to occurrence of events that have undesirable consequences such asDelays Increased costs Inability to meet technical specifications

Good risk management involves Identifying as many risks as possibleAnalyzing and assessing those risksWorking to minimize the probability of their occurrenceEstablishing contingency plans and budgets for dealing with

any that do occur

17-71

Operations Strategy Projects present both strategic opportunities and risks

It is critical to devote sufficient resources and attention to projects Projects are often employed in situations that are characterized by

significant uncertainties that demandCareful planningWise selection of project manager and teamMonitoring of the project

Project software can facilitate successful project completionBe careful to not focus on critical path activities

to the exclusion of other activities that may become critical

It is not uncommon for projects to fail When that happens, it can be beneficial to examine the probable

reasons for failure

17-72