16. Project Management.ppt

8/22/2019 16. Project Management.ppt

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Project Management


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Introduction:Project Management Drivers

Expansion of knowledge

Demand for new products

Worldwide markets Competition

Belief better living though technology

Expanding size of projects


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Introduction:Three Project Objectives

Performance Cost

Time


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Introduction:Recent Managing Changes

Less hierarchical

Systems approach

Project oriented


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Project Definition

Definition used by PMI*:

*Project Management Institute

A temporary endeavor undertaken tocreate a unique product or service


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Terminology

Program (group of projects)

Project

Task (subset of work elements) Work package (sub element of task)

Work unit


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Project Attributes

Purpose

Life cycle Interdependencies

Uniqueness

Conflict


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Project Life Cycle:(% Completion) Vs. (Time)

Slow start

Quick momentum

Slow finish


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Project Life Cycle:Increasing Marginal Returns

Return as applied to late

stages in PLC

Compare to standard

PLC showing

DECREASING marginal

return in late stages of

PLC


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Project Life Cycle:Reduce Uncertainty of Cost Estimate

Figure 1.6


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Strategic Management

and Project Selection


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Overview of PS Process

Project Management Office (PMO):Aligning corporate needs and project goals

Project selection: Choose candidate

projects using evaluation criteria Dealing with uncertainty: Risk analysis

Strategically selecting best projects:Project Portfolio Process (PPP)

Locking up the deal: Writing a projectproposal


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Project Management Maturity

Levels

Ad-hoc (essentially disorganized)

Abbreviated (some processes exist) Organized (standardized processes)

Managed (measured processes)

Adaptive (continuous improvement)


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PS Models

Idealized view of reality

Representing the STRUCTURE of the

problem, not the detail

Deterministic or stochastic


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Criteria for Project Selection

Models

Realism (technical-, resource-, market-risk)

Capability (adequately sophisticated)

Flexibility (valid results over large domain) Ease of Use (no expert needed to run model)

Cost (much less than project benefit)

Easy Computerization (use standard software)


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Nature of PS models:

Caveats

Project decisions are made by PM ---

NOT by PS model!

A PS model APPROXIMATES, but

does NOT DUPLICATE reality!


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Nature of PS Models:Methodology

Startwith detailed list of firms goals

Create list of project evaluation factors(PEFs)

Weigh every element in PEF list

Compute an overall score for projectbased on weighted PEFs

Select project that has the closestalignment with firms goals


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Project Evaluation Factors

(PEFs)

Production Factors

Marketing Factors Financial Factors

Personnel Factors

Administrative and Misc. Factors


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Types of PS Models:Nonnumeric

Sacred Cow

Operating Necessity

Competitive Necessity

Product Line Extension

Comparative Benefit Model


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Numeric PS Models:

Profit / Profitability

Payback Period (PB)

Average Rate of Return

Discounted Cash Flow (NPV) Internal Rate of Return

Profitability Index

Other Profitability Models


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Choosing the PS Model

Dependent on wishes and philosophyof management

80% of Fortune 500 firms choosenonnumeric PS models

Firms with outside funding oftenchoose scoring PS models

Firms without outside funding oftenchoose profit / profitability PS models


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Elements of ProjectManagement

Project team

Individuals from different departments within

company Matrix organization

Team structure with members from different

functional areas depending on skills needed

Project manager Leader of project team


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Project Planning, Scheduling, and

ControllingProject Planning1. Setting goals

2. Defining the project

3. Tying needs into timed project

activities

4. Organizing the team

Project Scheduling1. Tying resources to specific activities

2. Relating activities to each other

3. Updating and revising on regular

basisProject Controlling1. Monitoring resources, costs, qualityand budgets

2. Revising and changing plans

3. Shifting resources to meet demands

Before Project

During Project


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Reasons for Project Planning

Establish directions for project team

Support objectives of parent organization

Make allowance for risk Put controls on the planned work


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Project Planning

Statement of work

Written description of goals, work & timeframe of project

Activities require labor, resources & time Precedence relationship shows sequential

relationship of project activities


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Project Planning

Statement of work

written description of goals, work & timeframe of project

Activities require labor, resources & timePrecedence relationship shows sequential

relationship of project activitiesConstruct forms Pour concrete1 32

Simp l i fied Pro ject Network


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Elements of

Project PlanningDefine project objective(s)

Identify activities

Establish precedence relationships

Make time estimates

Determine project completion time

Compare project schedule objectives

Determine resource requirements tomeet objective


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Work Breakdown Structure

Hierarchical organization of work to be

done on a project

Project broken down into modules

Modules subdivided into

subcomponents, activities, and tasks

Identifies individual tasks, workloads,

and resource requirements


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Work Breakdown Structure

Hierarchical organization of work to be

done on a project

Project broken down into modules

Modules subdivided into

subcomponents, activities, and tasks

Identifies individual tasks, workloads,

and resource requirements

Dinner

Pasta Sauce Salad Bread Wine Setting

Table Atmosphere

Purchase Purchase Purchase Purchase Purchase Set table Light candles

Boil water Add tomato Wash Butter top Open Turn on musicsauce/paste lettuce

Cook Saut Drain Slice Tasteonion & garlic lettuce

Drain Cool Tear Heat Servemeatballs lettuce

AddServe Add spices croutons/ Serve

dressing

Cook sauce Mix

Serve Serve Figure 6.1


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Budgeting and Cost Estimation


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Projects Make the Best of

Scarce Resources


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Developing a Project Budget

Three major elements

Forecast what will be needed

Labor and material

How much will it cost?

When will it be needed?

Thus, the budget reflects the project plan,

time-phased, in monetary terms


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Why Budgeting for Projects is

Tougher By definition, projects are unique, non-

recurring efforts

So theres often little history, little tradition

to rely on

Further, projects can last for years

More uncertainty, more risk


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Two Major Approaches to

Budgeting Top-Down

Bottom-Up

Each has advantages . . . And

disadvantages as well


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Behavioral Issues in Budgeting

Different perspectives, based on managerial

level

Senior people tend to underestimate, junior people

tend to overestimate Lower levels tend to arbitrarily add reserves, upper

levels to arbitrarily delete them

Bottom Line: Any system can be gamed

So know what the games are . . .


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Financial Issues Worth

Considering: Inflation Inflation can distort estimates in different ways

Actual costs from the past will be less than

comparables for today the older the data, the

greater the disparity

Long-duration projects can create special problems

Six percent inflation doubles cost in just 12 years . . .

. . . And 6% is low in much of the world


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A Gantt Chart

Popular too l for pro ject schedul ing

Graph w ith bar for represent ing the

t ime for each task Provides visual disp lay of project

schedule

A lso shows slack for act iv i ties

Amount of t ime act iv ity can bedelayed withou t delaying p roject


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A Gantt Chart

| | | | |Activity

Design houseand obtainfinancing

Lay foundation

Order andreceivematerials

Build house

Select paint

Select carpet

Finish work

0 2 4 6 8 10Month

Month1 3 5 7 9


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CPM/PERT

Critical Path Method (CPM)

DuPont & Remington-Rand (1956)

Deterministic task times

Activity-on-node network construction

Project Eval. & Review Technique (PERT)

US Navy, Booz, Allen & Hamilton

Multiple task time estimates Activity-on-arrow network

construction


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The Project Network

Network consists of branches & nodes

1 32

Branch

Node


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Project Network for a House

3

2 0

13

1 1

11 2 4 6 7

3

5

Lay

foundation

Design house

and obtain

financing

Order and

receive

materials

Dummy

Finish

work

Select

carpet

Select

paint

Build

house


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Critical Path

A path is a sequence of connected activities

running from start to end node in network

The critical path is thepath with the longest

duration in the network

Project cannot be

completed in less thanthe time of the critical

path


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The Critical

Path

A: 1-2-3-4-6-7

3 + 2 + 0 + 3 + 1 = 9monthsB: 1-2-3-4-5-6-7

3 + 2 + 0 + 1 + 1 + 1 = 8months

C: 1-2-4-6-7

3 + 1 + 3 + 1 = 8monthsD: 1-2-4-5-6-7

3 + 1 + 1 + 1 + 1 = 7months

3

2 0

1

3

1 1

1

1 2 4 6 7

3

5

Lay

foundation

Design house

and obtain

financing

Order and

receive

materials

Dummy

Finish

work

Select

carpet

Select

paint

Build

house


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The Critical

Path3

2 0

1

3

1 1

1

1 2 4 6 7

3

5

Lay

foundation

Design house

and obtain

financing

Order and

receive

materials

Dummy

Finish

work

Select

carpet

Select

paint

Build

house

1 2 4 6 7

3

5

3

2 0

1

3

1 1Start at 3 months

Start at 5 months

1

Finish at

9 months

Start at 8 months

Activity Start Times


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Probabilistic Time Estimates

Reflect uncertainty of activity times

Beta distribution is used in PERT

a= optimistic estimate

m= most likely time estimate

b= pessimistic time estimate

where

Mean (expected time): t=a+ 4m+ b

6

Variance: 2 = b- a6

2


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Example Beta Distributions

P(time)

P(time)

P(time)

Time

a mt ba m t b

m = t

Time

Time

ba


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Normal Distribution Of Project Time

= tp Timex

Z

Probability


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Project Control

All activities identified and included

Completed in proper sequence

Resource needs identifiedSchedule adjusted

Maintain schedule and

budget

Complete on time


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Crashing costs increase as project

duration decreases

Indirect costs increase as projectduration increases

Reduce project length

as long as crashingcosts are less than

indirect costs

Time-Cost Relationship


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Time-Cost Tradeoff

Cost(

$)

Project duration

Crashing Time

Minimum cost = optimal project timeTotal project cost

Indirect cost

Direct cost


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