MBA 8452 Systems and Operations ManagementMBA 8452 Systems and Operations Management

PROJECT PROJECT MANAGEMENTMANAGEMENT

2

QualityManagement

StatisticalProcess Control

Inventory Control

Just in Time

Introduction to Operations Management/ Operations Strategy

ProjectManagement

Planning for ProductionProcess Analysisand Design

Process Controland Improvement

Waiting Line Analysis

Services

Manufacturing

Process Analysis

Job DesignAggregate Planning

Capacity Management

Supply ChainManagement

Layout/ Assembly Line Balancing

Scheduling

3

Objective: Project Management

• Crashing the Project

• CPM

• Types of Projects

• Defining Project Management

• Work Breakdown Structure

• Gantt Chart and Network Diagrams

4

CPM (One Time Estimate)

Example 1Repair of a garage damaged by fire and & the house damaged by smoke

Activity Designation Immed. Pred. Time (Weeks)Assess damages to the home A None 1Write and submit plan to do the job B A 1Obtain approval C B 1Get the building inspected D A 2Hire and schedule contractors E C 1Complete the work F D, E 12Inspect the completed work G F 1

5

Project A set of activities (tasks) that are

interrelated with a common aim to produce a valuable output

Characteristics Large-scale, one of a kind, time

consuming Precedence relationship among activities Time and budget limits

6

Project Management

Planning, directing, and controlling resources (people, equipment, material) to meet specific objectives within the technical, cost, and time constraints of the project

We use a team approach to organize for project management.

7

Project Organizational Structures

Pure Project performed by a self-contained team works

full time on the project

Functional Project each component is performed by people

within a functional area

Matrix Project A combination of pure and functional

projects

8

Pure Project

Pure Project - a self-contained team works full time on the project

Project Manager

Team Member A

Team Member E

Team Member C

Team Member B

Team Member D

Each team member has a specialty area: purchasing, design engineering, operations, accounting, etc.

9

Pure Project:Advantages

Full authority of project manager

One boss to report

Shortened communication lines

High team pride, motivation, and commitment

10

Pure Project: Disadvantages

Duplication of resources

Lack of organizational goals and policies

Lack of technology transfer

No functional area "home” for team members

11

Functional Project

President

Research andDevelopment

Engineering Manufacturing

ProjectA

ProjectB

ProjectC

ProjectA

ProjectB

ProjectC

ProjectA

ProjectB

ProjectC

12

Functional Project:Advantages

Shared manpower and resources

Maintained technical expertise within the functional area

Nature “home” in the functional area for team members

Critical mass of specialized knowledge

13

Functional Project:Disadvantages

Compromised non-functional-related activities

Weak motivation of team

members

Slow response to clients’ needs

14

Matrix Project

President

Research andDevelopment

Engineering Manufacturing Marketing

ManagerProject A

ManagerProject B

ManagerProject C

15

Matrix Project:Advantages

Enhanced interfunctional communications

Pinpointed responsibility

Minimized duplication of resources

Functional home for team members

16

Matrix Project:Disadvantages

Two bosses

Depends on Project Manager’s negotiating skills

Potential for suboptimization

17

Work Breakdown Structure (WBS)

Program- Restoration of Homes Damaged by Fire

Project 1 Project 2

Task 1.1

Subtask 1.1.1

Work Package 1.1.1.1

Level

1

2

3

4

Task 1.2

Subtask 1.1.2

Work Package 1.1.1.2

Carr’s Home Baker’s Home

Work with Insurance to assess damages

Work with Insurance to assess damages

Write & submit proposal to do the work

Write & submit proposal to do the work

Hire contractors to do the work: construction, electrical, painters, etc.

18

Work Breakdown Structure

Program: New Plant Construction and Start-up

Project 1: Analytical StudyTask 1: Marketing/Production StudyTask 2: Cost Effectiveness Analysis

Project 2: Design and LayoutTask 1: Product Processing SketchesTask 2: Product Processing

Blueprints

Project 3: InstallationTask 1: FabricationTask 2: SetupTask 3: Testing and Run

19

Representing Projects: Gantt Chart

Time

Act

ivit

ies

A

B

C

D

E

20

Representing Projects: Network Diagram

A

B

C

D

E

20

10

30

8

18

21

Critical Path Scheduling:CPM and PERT

CPM (Critical Path Method) J. E. Kelly of Remington-Rand and M. R.

Walker of Du Pont (1957) Scheduling maintenance shutdowns of

chemical processing plants PERT (Program Evaluation and Review

Technique) U.S. Navy Special Projects Office (1958) Polaris missile project

22

CPM (One Time Estimate)

Example 1

Consider the following consulting project:Activity Designation Immed. Pred. Time (Weeks)Assess customer's needs A None 2Write and submit proposal B A 1Obtain approval C B 1Develop service vision and goals D C 2Train employees E C 5Quality improvement pilot groups F D, E 5Write assessment report G F 1

Develop a critical path diagram and determine theduration of the critical path and slack times for allactivities

Example1 23

Represent the Project:Gantt Chart

Activity

Assess customer's needs A

Write and submit proposal B

Obtain approval C

Develop service vision and goals D

Train employees E

Quality improvement pilot groups F

Write assessment report G| | | | | | | | | | | | | | | |1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Week

Example 1 24

Network Diagram

A, 2 B, 1 C, 1

D, 2

E, 5

F, 5 G, 1

Example 1 25

Forward Pass: Calculate Early Start and Early Finish times

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

?A, 2 B, 1 C, 1

D, 2

E, 5

F, 5 G, 1

ES=4EF=6

Example 1 26

Calculation for Merged Activity (F)

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A, 2 B, 1 C, 1

D, 2

E, 5

F, 5 G, 1

Example 1 27

Backward Pass: Calculate Late Finish and Late Start times

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A, 2 B, 1 C, 1

D, 2

E, 5

F, 5 G, 1

LS=14LF=15

LS=9LF=14

LS=4LF=9

LS=7LF=9

?

Example 1 28

Calculation for Fork Activity (C)

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A, 2 B, 1 C, 1

D, 2

E, 5

F, 5 G, 1

LS=14LF=15

LS=9LF=14

LS=4LF=9

LS=7LF=9

LS=3LF=4

LS=2LF=3

LS=0LF=2

Example 1 29

Critical Path & Slack Times

ES=9EF=14

ES=14EF=15

ES=0EF=2

ES=2EF=3

ES=3EF=4

ES=4EF=9

ES=4EF=6

A, 2 B, 1 C, 1

D, 2

E, 5

F, 5 G, 1

LS=14LF=15

LS=9LF=14

LS=4LF=9

LS=7LF=9

LS=3LF=4

LS=2LF=3

LS=0LF=2

Duration = 15 weeks

Slack=(7-4)=(9-6)= 3 Wks

Slack=0 Slack=0 Slack=0

Slack=0Slack=0 Slack=0

Critical path: A, B, C, E, F, G

Example 1 30

Summary

Q: What is the minimum time to finish the projectA: 15 weeks

Q: Which activities are critical for whole project?A: Activities A, B, C, E, F, G

Q: Which activities can be delayed, by how much?A: D, 3 weeks

31

Questions Addressed by CPM/PERT

When will the project be completed? Which tasks are most critical to ensure

timely completion of the project Which tasks can be delayed if necessary

without delaying the whole project? When there is uncertainty how likely can

the project be completed by due date?

32

Critical Path Scheduling with Three Time Estimates

Three estimates of the completion time for each activity (task)a = optimistic timem = most-likely timeb = pessimistic time

33

Solution Procedure Calculate the mean of each task time Calculate the variance of each task time Determine the critical path using the estimated time Calculate variance and the standard deviation of the critical path

Calculate probability of the time to complete the project by a certain date

34

PERT (Three Time Estimates)

Example 2

ImmediateTask Predecesor Optimistic (a) Most Likely (m) Pessimistic (b)

A None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E, F 1 4 7I G, H 4 19 28

Time Estimates (Days)

Example 2 35

Expected Times and Variances:CalculationTask a m b Expected Time Variance

A 3 6 15 7 4B 2 4 14 5.333 4C 6 12 30 14 16D 2 5 8 5 1E 5 11 17 11 4F 3 6 15 7 4G 3 9 27 11 16H 1 4 7 4 1I 4 19 28 18 16

6

4Time Expected

bmaET

22

6Variance

ab

Example 2 36

Network Diagram with ET

A, 7

B5.333

C, 14

D, 5

E, 11

F, 7

H, 4

G, 11

I, 18

Example 2 37

Critical Path Method

A, 7

B5.333

C, 14

D, 5

E, 11

F, 7

H, 4

G, 11

I, 18

ES=0

LS=0

EF=7

LF=7

0

19.667

5.333

25

7 21

7 21

7 12

20 25

21 32

21 32

12 19

25 32

32 36

32

36

5.333 16.333

36

36 54

36 54

25Critical Path = A-C-E-H-I Expected Completion Time= 54

38

Formulas

Calculate standard deviation of the critical path

Calculate probability of the time to complete the project (T) base on the statistic: 2

cp

2cp

ETDZ

D = Due date

TE = Expected project completion

time

2cp

= variance of a task on critical path

Example 2 39

Standard Deviation of CP

4031.6411614164222222 IHECAcp

Now we have expected project completion time (TE) = 54 days standard deviation of critical path = 6.4031

The Z statistic is

4031.6

542

DTD

Zcp

E

Example 2 40

Calculate Probabilities of Completion

What is the probability of finishing this project in less than 53 days?

Solution: Since D = 53,

P(T < D) = P(Z < -0.1562) .5 - .0636 = .436, or 43.6 %

(See Appendix D)

TTE = 54

P(T < D)

1562.04031.6

5453

4031.6

54

D

Z

53

Example 2 41

Calculate Probabilities of Completion

What is the probability that the project duration will exceed 56 weeks?

Solution: Since D = 56,

P(T > D) = P(Z > 0.3123) .5 - .1217 = .377, or 37.7 %

(See Appendix D)

TTE = 54

3123.04031.6

5456

4031.6

54

D

Z

P(T > D)

56

42

Expediting A Project

Time-Cost Model Motivations to accelerate a project

Avoid late penalties Get incentive payments for early completion Free resources for other uses

Basic Assumption: some activities can be expedited, at a cost

Time-Cost Tradeoff Problem What is the optimum project schedule based

on time-cost tradeoffs?

43

Time-Cost Relationships Activity Direct Costs—direct labor

expenses, materials, per-diem expenses—increase as the project duration is shortened

Project Indirect Costs—overhead, facilities, resource opportunity cost—increase as project completion time increases

44

Time-Cost Trade-Off Model

IllustrationC

ost

($

)

Project Duration

Crashing

Total cost

Indirect cost

Direct cost

Minimum cost = optimal project time

Time

45

Time-Cost Model Some Terminology

Normal Cost: the cost to complete an activity under normal condition (normal expected cost)

Normal Time: the time to complete an activity under normal condition (with normal cost)

Crash Time: the shortest possible time to complete an activity

Crash Cost: the cost to complete an activity within crash time

46

Time-Cost Model

Solution Procedure

Find the critical path with normal times

Compute unit cost to crash each activity

Shorten the critical path one day (or week etc.) at a time with the least cost activity

Find the minimum-total-cost crashing schedule

47

Time-Cost Model

Example 3

ActivityNormal Time

(NT)Crash Time

(CT)Normal Cost

(NC)Crash Cost

(CC)A 6 6 700 700B 10 8 500 1500C 5 4 600 900D 4 1 200 2300E 9 7 400 1600F 2 1 650 1450

A BF

C D E

6 10

5 4

2

9

Assume project indirect cost = $1000/day

Example 3 48

Critical Path and Unit Crash Cost Determine normal critical path

A-B-F: Duration = 18 C-D-E-F: Duration = 20 (critical path)

Calculate cost per day to crash

Activity NT CT NC CCCost per day to crash

(CC-NC)/(NT-CT)Available days to crash

(NT-CT)A 6 6 700 700 - -B 10 8 500 1500 500 2C* 5 4 600 900 300 1D* 4 1 200 2300 700 3E* 9 7 400 1600 600 2F* 2 1 650 1450 800 1

Example 3 49

Shortening The Project

Step Crashing Activity

Crashing Cost

Project Completion

Time Critical Path

Possible Activities for

Crashing 0 None 0 20 C-D-E-F C, D, E, F1 C $300 19 C-D-E-F D, E, F2 E $600 18 C-D-E-F & A-B-F B, D, E, F3 F $800 17 C-D-E-F & A-B-F B, D, E4 B&E $1,100 16 C-D-E-F & A-B-F B, D5 B&D $1,200 15 C-D-E-F & A-B-F -

Example 3 50

What Is the Best Schedule?Project

DurationCumulative Crashing

Costs Indirect Costs Total Cost20 0 20($1000)=$20000 $20,00019 $300 19($1000)=$19000 $19,30018 $300+$600=$900 18($1000)=$18000 $18,90017 $900+$800=$1700 17($1000)=$17000 $18,70016 $1700+$1100=$2800 16($1000)=$16000 $18,80015 $2800+$1200=$4000 15($1000)=$15000 $19,000

$18,000

$19,000

$20,000

$21,000

14 15 16 17 18 19 20 21

Project duration

To

tal c

os

t

51

Caveat on the Following CPM/PERT Assumptions Project activities can be identified as

entities with a clear beginning and ending point for each activity

Project activity sequence relationships can be specified and networked

Project control should focus on the critical path

The expected activity times and variances in PERT are based on beta distribution