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Chapter 18

Chapter 18. Project Management. Characteristics of a Project. A unique, one-time effort Requires the completion of a large number of interrelated activities Resources, such as time and/or money, are limited Typically requires its own management structure.

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Chapter 18

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  1. Chapter 18 Project Management

  2. Characteristics of a Project • A unique, one-time effort • Requires the completion of a large number of interrelated activities • Resources, such as time and/or money, are limited • Typically requires its own management structure MTSU Management 362

  3. When Project Organization Works Best • Work can be defined with a specific goal and deadline • The job is somewhat unique or unfamiliar to the existing organization • The work contains complex interrelated tasks requiring specialized skills • The project is temporary, but critical to the organization MTSU Management 362

  4. Project Manager Responsible for Work Quality Human Resources Time Communications Costs MTSU Management 362

  5. Feasibility Planning Concept Execution Termination Project Life Cycle Management MTSU Management 362

  6. Project X Level 1 Level 2 Level 3 Level 4 Figure 18-1 Work Breakdown Structure MTSU Management 362

  7. Tools to Assist in Managing a Project • Gantt chart • Network Analysis • Critical Path Method (CPM) • Program Evaluation and Review Technique (PERT) • Simulation MTSU Management 362

  8. MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Planning and Scheduling Gantt Chart Locate new facilities Interview staff Hire and train staff Select and order furniture Remodel and install phones Move in/startup MTSU Management 362

  9. Network Analysis • Designed to provide intense microcontrol of the project • The system is dynamic; it continues to provide periodic reports as the project progresses • The network may be drawn using one of two notations • Activity-on-arrow (A-O-A) • Activity-on-node (A-O-N) MTSU Management 362

  10. Questions Which May Be Addressedby Network Analysis (1 of 2) • When will the project be completed? • What are the critical activities or tasks in the project? • Which are the noncritical activities? • What is the probability that the project will be completed by a specific date? • Is the project on schedule, ahead of schedule, or behind schedule? • Is the project over or under cost budget? MTSU Management 362

  11. Questions(2 of 2) • Are there enough resources available to finish the project on time? • If the project must be finished in less than the scheduled amount of time, what is the way to accomplish this at least cost? MTSU Management 362

  12. Inputs to Network Analysis • All significant activities • The relationships among the activities (identify the immediate predecessors to each activity) • The estimated time (or other limited resources) for each activity MTSU Management 362

  13. A-O-A Terminology (1 of 4) • Activity • A task or a certain amount of work required in the project • Requires time to complete • Represented by an arrow • Dummy activity • Indicates only precedence relationships • Does not require any time or effort MTSU Management 362

  14. A-O-A Terminology (2 of 4) • Event • Signals the beginning or ending of an activity • Designates a point in time • Represented by a circle (node) • Network or Precedence Diagram • Shows the sequential relationships among activities using the above notation MTSU Management 362

  15. a b c a c b a c a c Dummy activity b b d A-O-A Terminology (3 of 4) MTSU Management 362

  16. A-O-A Terminology (4 of 4) • Path • A connected sequence of activities leading from the starting event to the ending event • Critical path • The longest path (time); determines the project duration • Critical activities • All of the activities that make up the critical path MTSU Management 362

  17. Activity Information (1 of 3) • Earliest Start (ES) • The earliest that an activity can begin; assumes all preceding activities have been completed as early as possible • Earliest Finish (EF) • The earliest that an activity can finish • ES + activity time MTSU Management 362

  18. Activity Information (2 of 3) • Latest Finish (LF) • The latest that an activity can finish and not delay the project completion time • Latest Start (LS) • The latest that an activity can start and not delay the project completion time • LF - activity time MTSU Management 362

  19. Activity Information (3 of 3) • Activity Slack • It is the maximum amount of time that an activity can be extended before that activity becomes critical, i.e., it becomes part of a critical path • LS-ES = LF-EF MTSU Management 362

  20. 7 1 1 2 3 5 8 9 4 6 Problem 3 - Deterministic Time Estimates c 6 e 3 a 15 b 12 d 5 i 7 g 8 f 8 k 6 h 9 j 14 MTSU Management 362

  21. Probabilistic Network Approach (1 of 4) • Based on the assumption that an activity’s duration follows a probability distribution instead of being a single value • The probabilistic information about the activities is translated into probabilistic information about the project • It is assumed that the project completion time follows a normal distribution MTSU Management 362

  22. Probabilistic Network Approach (2 of 4) • Three time estimates are required to compute the parameters of an activity’s duration distribution: pessimistic time (b) - the time the activity would take if things do not go well most likely time (m) - the consensus best estimate of the activity’s duration optimistic time (a) - the time the activity would take if things do go well MTSU Management 362

  23. Figure 18-5 Probabilistic Network Approach (3 of 4) a m te b Activity start Optimistictime Most likely time (mode) Pessimistic time Activity Duration MTSU Management 362

  24. Probabilistic Network Approach (4 of 4) • From these three time estimates about an activity, two probability distribution parameters are calculated: the mean and the variance MTSU Management 362

  25. Time/Cost Trade-offs (1 of 2) • Project managers may have the option or requirement to crashthe project, or accelerate the completion of the project • This is accomplished by reducing the length of the critical path(s) MTSU Management 362

  26. Time/Cost Trade-offs (2 of 2) • The length of the critical path is reduced by reducing the duration of an activity on the critical path, i.e., critical activities • It is assumed that by expending more money on an activity, the length of the activity can be reduced • The objective is to reduce the length of the project at the lowest cost MTSU Management 362

  27. Figure 18-8 Time-Cost Trade-Offs: Crashing Total cost Expected indirect costs Shorten CRASH Cumulative cost of crashing Shorten Project length Optimum MTSU Management 362

  28. Build A A Done Build B B Done Build C C Done Build D Ship JAN FEB MAR APR MAY JUN On time! Advantages of PERT • Forces managers to organize • Provides graphic display of activities • Identifies • Critical activities • Slack activities MTSU Management 362

  29. Important activities may be omitted Precedence relationships may not be correct Estimates may include a fudge factor 4 2 1 5 6 3 Limitations of PERT 142 weeks MTSU Management 362

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