MBA 8452 Systems and Operations Management PROJECT MANAGEMENT

Introduction to Operations Management/ Operations Strategy Process Analysis and Design Project Management Process Analysis Planning for Production Process Control and Improvement Capacity Management Quality Management Aggregate Planning Job Design Just in Time Manufacturing Layout/ Assembly Line Balancing Services Statistical Process Control Scheduling Inventory Control Supply Chain Management Waiting Line Analysis 2

Objective: Project Management • Defining Project Management • Work Breakdown Structure • Types of Projects • Gantt Chart and Network Diagrams • CPM • Crashing the Project 3

CPM (One Time Estimate) Example 1 Repair of a garage damaged by fire and & the house damaged by smoke Activity Assess damages to the home Write and submit plan to do the job Obtain approval Get the building inspected Hire and schedule contractors Complete the work Inspect the completed work Designation Immed. Pred. Time (Weeks) A B C D E F G None A B A C D, E F 1 1 1 2 1 12 1 4

Project n n A set of activities (tasks) that are interrelated with a common aim to produce a valuable output Characteristics l l l Large-scale, one of a kind, time consuming Precedence relationship among activities Time and budget limits 5

Project Management n n 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. 6

Project Organizational Structures n Pure Project l n Functional Project l n performed by a self-contained team works full time on the project each component is performed by people within a functional area Matrix Project l A combination of pure and functional projects 7

Pure Project n Pure Project - a self-contained team works full time on the project Project Manager Team Member A Team Member B Team Member C Team Member D Team Member E Each team member has a specialty area: purchasing, design engineering, operations, accounting, etc. 8

Pure Project: Advantages n Full authority of project manager n One boss to report n Shortened communication lines n High team pride, motivation, and commitment 9

Pure Project: Disadvantages n Duplication of resources n Lack of organizational goals and policies n Lack of technology transfer n No functional area "home” for team members 10

Functional Project 11

Functional Project: Advantages n n 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 12

Functional Project: Disadvantages n Compromised non-functional-related activities n Weak motivation of team members n Slow response to clients’ needs 13

Matrix Project 14

Matrix Project: Advantages n Enhanced interfunctional communications n Pinpointed responsibility n Minimized duplication of resources n Functional home for team members 15

Matrix Project: Disadvantages n n n Two bosses Depends on Project Manager’s negotiating skills Potential for suboptimization 16

Work Breakdown Structure (WBS) Level 1 Program- Restoration of Homes Damaged by Fire Project 1 Project 2 Carr’s Home 2 3 Task 1. 1 Work with Insurance to assess damages Baker’s Home Task 1. 2 Subtask 1. 1. 1 Write & submit proposal to do the work 4 Work Package 1. 1 Work with Insurance to assess damages Subtask 1. 1. 2 Write & submit proposal to do the work Work Package 1. 1. 1. 2 Hire contractors to do the work: construction, electrical, painters, etc. 17

Work Breakdown Structure Program: New Plant Construction and Start-up Project 1: Analytical Study Task 1: Marketing/Production Study Task 2: Cost Effectiveness Analysis Project 2: Design and Layout Task 1: Product Processing Sketches Task 2: Product Processing Blueprints Project 3: Installation Task 1: Fabrication Task 2: Setup Task 3: Testing and Run 18

Representing Projects: Gantt Chart A Activities B C D E Time 19

Representing Projects: Network Diagram 10 20 8 B D 18 A 30 E C 20

Critical Path Scheduling: CPM and PERT n CPM (Critical Path Method) l l n J. E. Kelly of Remington-Rand M. R. Walker of Du Pont (1957) Scheduling maintenance shutdowns of chemical processing plants PERT (Program Evaluation and Review Technique) l l U. S. Navy Special Projects Office (1958) Polaris missile project 21

CPM (One Time Estimate) Example 1 Consider the following consulting project: Activity Assess customer's needs Write and submit proposal Obtain approval Develop service vision and goals Train employees Quality improvement pilot groups Write assessment report Designation Immed. Pred. Time (Weeks) A B C D E F G None A B C C D, E F 2 1 1 2 5 5 1 Develop a critical path diagram and determine the duration of the critical path and slack times for all activities 22

Represent the Project: Gantt Chart Example 1 23

Network Diagram D, 2 A, 2 B, 1 C, 1 F, 5 G, 1 E, 5 Example 1 24

Forward Pass: Calculate Early Start and Early Finish times ES=4 EF=6 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 A, 2 B, 1 C, 1 D, 2 ES=4 EF=9 ? F, 5 G, 1 E, 5 Example 1 25

Calculation for Merged Activity (F) ES=4 EF=6 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 A, 2 B, 1 C, 1 D, 2 ES=4 EF=9 ES=9 EF=14 F, 5 ES=14 EF=15 G, 1 E, 5 Example 1 26

Backward Pass: Calculate Late Finish and Late Start times ES=4 EF=6 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 A, 2 B, 1 C, 1 ? Example 1 D, 2 LS=7 LF=9 ES=4 EF=9 E, 5 LS=4 LF=9 ES=9 EF=14 ES=14 EF=15 F, 5 G, 1 LS=9 LF=14 LS=14 LF=15 27

Calculation for Fork Activity (C) ES=4 EF=6 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 A, 2 B, 1 C, 1 LS=0 LF=2 LS=2 LF=3 LS=3 LF=4 D, 2 LS=7 LF=9 ES=4 EF=9 E, 5 ES=9 EF=14 ES=14 EF=15 F, 5 G, 1 LS=9 LF=14 LS=14 LF=15 LS=4 LF=9 Example 1 28

Critical Path & Slack Times Slack=0 ES=0 EF=2 ES=2 EF=3 ES=3 EF=4 A, 2 B, 1 C, 1 LS=0 LF=2 LS=2 LF=3 LS=3 LF=4 Slack=0 Critical path: A, B, C, E, F, G Example 1 ES=4 EF=6 D, 2 LS=7 LF=9 ES=4 EF=9 E, 5 LS=4 LF=9 Slack=(7 -4)=(9 -6)= 3 Wks ES=9 EF=14 ES=14 EF=15 F, 5 G, 1 LS=9 LF=14 LS=14 LF=15 Slack=0 Duration = 15 weeks 29

Summary Q: What is the minimum time to finish the project A: 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 Example 1 30

Questions Addressed by CPM/PERT n n 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? 31

Critical Path Scheduling with Three Time Estimates n Three estimates of the completion time for each activity (task) a = optimistic time m = most-likely time b = pessimistic time 32

Solution Procedure ÊCalculate the mean of each task time Ë Calculate the variance of each task time Ì Determine the critical path using the estimated time Í Calculate variance and the standard deviation of the critical path Calculate probability of the time to complete the project by a certain date 33

PERT (Three Time Estimates) Example 2 34

Expected Times and Variances: Calculation Example 2 35

Network Diagram with ET C, 14 E, 11 H, 4 A, 7 D, 5 F, 7 I, 18 B 5. 333 Example 2 G, 11 36

Critical Path Method 7 21 21 C, 14 EF=7 ES=0 LS=0 A, 7 LF=7 7 7 20 21 D, 5 32 E, 11 21 12 12 25 32 25 F, 7 19 32 32 36 H, 4 32 36 36 54 I, 18 36 0 19. 667 B 5. 333 25 Critical Path = A-C-E-H-I Example 2 5. 333 25 54 16. 333 G, 11 36 Expected Completion Time= 54 37

Formulas Í Calculate standard deviation of the critical path = variance of a task on critical path Î Calculate probability of the time to complete the project (T) base on the statistic: D = Due date TE = Expected project completion time 38

Standard Deviation of CP n Now we have l l n expected project completion time (TE) = 54 days standard deviation of critical path = 6. 4031 The Z statistic is Example 2 39

Calculate Probabilities of Completion What is the probability of finishing this project in less than 53 days? Solution: Since D = 53, n P(T < D) = P(Z < -0. 1562) . 5 -. 0636 =. 436, or 43. 6 % (See Appendix D) P(T < D) Example 2 53 TE = 54 T 40

Calculate Probabilities of Completion What is the probability that the project duration will exceed 56 weeks? Solution: Since D = 56, n P(T > D) = P(Z > 0. 3123) . 5 -. 1217 =. 377, or 37. 7 % (See Appendix D) P(T > D) Example 2 TE = 54 56 T 41

Expediting A Project Time-Cost Model n Motivations to accelerate a project l l n Get incentive payments for early completion l n Avoid late penalties Free resources for other uses Basic Assumption: some activities can be expedited, at a cost Time-Cost Tradeoff Problem l What is the optimum project schedule based on timecost tradeoffs? 42

Time-Cost Relationships l l 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 43

Time-Cost Trade-Off Model Illustration Total cost Cost ($) Minimum cost = optimal project time Indirect cost Direct cost Crashing Time Project Duration 44

Time-Cost Model Some Terminology n n 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 45

Time-Cost Model Solution Procedure Ê Find the critical path with normal times Ë Compute unit cost to crash each activity Ì Shorten the critical path one day (or week etc. ) at a time with the least cost activity Í Find the minimum-total-cost crashing schedule 46

Time-Cost Model Example 3 A B 6 10 F C D E 5 4 2 9 Assume project indirect cost = $1000/day 47

Critical Path and Unit Crash Cost n Determine normal critical path l l n A-B-F: Duration = 18 C-D-E-F: Duration = 20 (critical path) Calculate cost per day to crash Example 3 48

Shortening The Project Example 3 49

What Is the Best Schedule? Example 3 50

Caveat on the Following CPM/PERT Assumptions n n 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 51