Master

Report
Operations
Management
Chapter 3 –
Project Management
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e
© 2006
Prentice
Hall, Inc. Hall, Inc.
©
2006
Prentice
3–1
Examples of Projects
 Building Construction
 Research Project
© 2006 Prentice Hall, Inc.
3–2
Management of Projects
 Planning - goal setting, defining the
project, team organization
 Scheduling - relates people, money,
and supplies to specific activities
and activities to each other
 Controlling - monitors resources,
costs, quality, and budgets; revises
plans and shifts resources to meet
time and cost demands
© 2006 Prentice Hall, Inc.
3–3
The Role of
the Project Manager
Highly visible
Responsible for making sure that:
 All necessary activities are finished in order
and on time
 The project comes in within budget
 The project meets quality goals
 The people assigned to the project receive
motivation, direction, and information
© 2006 Prentice Hall, Inc.
3–4
Project Scheduling
 Identifying precedence
relationships
 Sequencing activities
 Determining activity times & costs
 Estimating material and worker
requirements
 Determining critical activities
© 2006 Prentice Hall, Inc.
3–5
Project Management
Techniques
 Gantt chart
 Critical Path Method
(CPM)
 Program Evaluation
and Review
Technique (PERT)
© 2006 Prentice Hall, Inc.
3–6
A Simple Gantt Chart
J
F
M
Time
A M J
J
A
S
Design
Prototype
Test
Revise
Production
© 2006 Prentice Hall, Inc.
3–7
Service For A Delta Jet
Passengers
Baggage
Fueling
Cargo and mail
Galley servicing
Lavatory servicing
Drinking water
Cabin cleaning
Cargo and mail
Flight services
Operating crew
Baggage
Passengers
Deplaning
Baggage claim
Container offload
Pumping
Engine injection water
Container offload
Main cabin door
Aft cabin door
Aft, center, forward
Loading
First-class section
Economy section
Container/bulk loading
Galley/cabin check
Receive passengers
Aircraft check
Loading
Boarding
0
Figure 3.4
© 2006 Prentice Hall, Inc.
15
30
Minutes
45
60
3–8
PERT and CPM
 Network techniques
 Developed in 1950’s
 CPM by DuPont for chemical plants (1957)
 PERT by Booz, Allen & Hamilton with the
U.S. Navy, for Polaris missile (1958)
 Consider precedence relationships and
interdependencies
 Each uses a different estimate of
activity times
© 2006 Prentice Hall, Inc.
3–9
Six Steps PERT & CPM
1. Define the project and prepare the
work breakdown structure
2. Develop relationships among the
activities - decide which activities
must precede and which must follow
others
3. Draw the network connecting all of
the activities
© 2006 Prentice Hall, Inc.
3 – 10
Six Steps PERT & CPM
4. Assign time and/or cost estimates
to each activity
5. Compute the longest time path
through the network – this is called
the critical path
6. Use the network to help plan,
schedule, monitor, and control the
project
© 2006 Prentice Hall, Inc.
3 – 11
A Comparison of AON and
AOA Network Conventions
Activity on
Node (AON)
(a) A
C
B
A
(b)
C
B
B
(c)
A
Figure 3.5
© 2006 Prentice Hall, Inc.
C
Activity
Meaning
A comes before
B, which comes
before C
A and B must both
be completed
before C can start
B and C cannot
begin until A is
completed
Activity on
Arrow (AOA)
A
B
C
A
B
C
B
A
C
3 – 12
AON Example
Milwaukee Paper Manufacturing's
Activities and Predecessors
Activity
A
Description
Build internal components
Immediate
Predecessors
—
B
Modify roof and floor
—
C
Construct collection stack
A
D
Pour concrete and install frame
A, B
E
Build high-temperature burner
C
F
Install pollution control system
C
G
Install air pollution device
D, E
H
Inspect and test
F, G
Table 3.1
© 2006 Prentice Hall, Inc.
3 – 13
AON Network for
Milwaukee Paper
A
Activity A
(Build Internal Components)
B
Activity B
(Modify Roof and Floor)
Start
Start
Activity
Figure 3.6
© 2006 Prentice Hall, Inc.
3 – 14
AON Network for
Milwaukee Paper
Activity A Precedes Activity C
A
C
B
D
Start
Activities A and B
Precede Activity D
© 2006 Prentice Hall, Inc.
Figure 3.7
3 – 15
AON Network for
Milwaukee Paper
F
A
C
E
Start
H
B
D
G
Arrows Show Precedence
Relationships
Figure 3.8
© 2006 Prentice Hall, Inc.
3 – 16
Determining the Project
Schedule
Perform a Critical Path Analysis
 The critical path is the longest path
through the network
 The critical path is the shortest time in
which the project can be completed
 Any delay in critical path activities
delays the project
 Critical path activities have no slack
time
© 2006 Prentice Hall, Inc.
3 – 17
Determining the Project
Schedule
Perform a Critical Path Analysis
Activity
A
B
C
D
E
F
G
H
Description
Time (weeks)
Build internal components
2
Modify roof and floor
3
Construct collection stack
2
Pour concrete and install frame
4
Build high-temperature burner
4
Install pollution control system
3
Install air pollution device
5
Inspect and test
2
Total Time (weeks)
25
Table 3.2
© 2006 Prentice Hall, Inc.
3 – 18
Determining the Project
Schedule
Perform a Critical Path Analysis
Earliest start (ES) = earliest time at which an activity can
Activity Description
Time (weeks)
start, assuming all predecessors
have
A
Build internal
components
2
been completed
Modify
roof and
floor
3
EarliestBfinish (EF)
= earliest
time
at which an activity can
be finished
C
Construct
collection stack
2
D start (LS)
Pour=concrete
and
4
Latest
latest time
at install
which frame
an activity can
start so as to not delay
E
Build high-temperature
burnerthe completion
4
of thecontrol
entire project
F
Install time
pollution
system
3
LatestGfinish (LF)
= latest
time bydevice
which an activity has
Install
air pollution
5 to
be finished so as to not delay the
H
Inspect and test
2
completion time of the entire project
Table
Total Time (weeks)
25 3.2
© 2006 Prentice Hall, Inc.
3 – 19
Determining the Project
Schedule
Perform a Critical Path Analysis
Activity Name
or Symbol
A
Earliest
Start
ES
EF
Latest
Start
LS
LF
Figure 3.10
© 2006 Prentice Hall, Inc.
2
Earliest
Finish
Latest
Finish
Activity Duration
3 – 20
Forward Pass
Begin at starting event and work forward
Earliest Start Time Rule:
 If an activity has only one 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)
© 2006 Prentice Hall, Inc.
3 – 21
Forward Pass
Begin at starting event and work forward
Earliest 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
© 2006 Prentice Hall, Inc.
3 – 22
ES/EF Network for
Milwaukee Paper
ES
EF = ES + Activity time
Start
0
0
0
© 2006 Prentice Hall, Inc.
3 – 23
ES/EF Network for
Milwaukee Paper
EF of A =
ES of A + 2
ES
of A
0
Start
0
A
0
2
0
2
© 2006 Prentice Hall, Inc.
3 – 24
ES/EF Network for
Milwaukee Paper
0
A
2
0
Start
0
0
2
EF of B =
ES of B + 3
ES
of B
B
0
3
3
© 2006 Prentice Hall, Inc.
3 – 25
ES/EF Network for
Milwaukee Paper
0
A
2
2
0
Start
2
C
4
2
0
0
0
B
3
3
© 2006 Prentice Hall, Inc.
3 – 26
ES/EF Network for
Milwaukee Paper
0
A
2
2
0
Start
2
C
4
2
0
= Max (2, 3)
0
3
0
B
3
© 2006 Prentice Hall, Inc.
D
7
3
4
3 – 27
ES/EF Network for
Milwaukee Paper
0
A
2
2
2
0
Start
C
4
2
0
0
0
B
3
© 2006 Prentice Hall, Inc.
3
3
D
7
4
3 – 28
ES/EF Network for
Milwaukee Paper
0
A
2
2
2
0
Start
C
4
4
2
F
7
3
0
4
0
E
8
13
4
0
B
3
3
3
D
4
7
H
15
2
G
8
13
5
Figure 3.11
© 2006 Prentice Hall, Inc.
3 – 29
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)
© 2006 Prentice Hall, Inc.
3 – 30
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
© 2006 Prentice Hall, Inc.
3 – 31
LS/LF Times for
Milwaukee Paper
0
A
2
2
2
0
Start
C
2
0
4
E
8
13
13
4
0
B
3
© 2006 Prentice Hall, Inc.
7
3
0
Figure 3.12
4
4
F
3
H
2
15
15
LS = LF
D – Activity time
G
3
7
4
8
13
5
LF = EF
of Project
3 – 32
LS/LF Times for
Milwaukee Paper
0
A
2
2
2
0
Start
C
4
4
10
2
F
3
7
13
E
0
8 of
LF =4 Min(LS
following activity)
0
13
13
4
0
B
3
3
3
D
4
7
H
2
15
15
G
8
13
5
Figure 3.12
© 2006 Prentice Hall, Inc.
3 – 33
LS/LF Times for
LF = Min(4, 10)
Milwaukee
Paper
0
A
2
2
2
0
Start
2
C
2
4
4
4
10
0
4
4
0
0
B
3
3
3
D
4
7
E
4
F
3
7
13
8
13
8
13
H
2
15
15
G
8
13
8
13
5
Figure 3.12
© 2006 Prentice Hall, Inc.
3 – 34
LS/LF Times for
Milwaukee Paper
0
0
0
0
Start
0
A
2
2
2
2
2
C
2
4
4
4
10
0
4
0
4
0
1
B
3
3
3
4
4
D
4
E
4
F
3
7
13
8
13
8
13
H
2
15
15
G
7
8
13
8
8
13
5
Figure 3.12
© 2006 Prentice Hall, Inc.
3 – 35
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
© 2006 Prentice Hall, Inc.
or
Slack = LF – EF
3 – 36
Computing Slack Time
Earliest Earliest
Start
Finish
Activity
ES
EF
A
B
C
D
E
F
G
H
0
0
2
3
4
4
8
13
2
3
4
7
8
7
13
15
Latest
Start
LS
Latest
Finish
LF
Slack
LS – ES
On
Critical
Path
0
1
2
4
4
10
8
13
2
4
4
8
8
13
13
15
0
1
0
1
0
6
0
0
Yes
No
Yes
No
Yes
No
Yes
Yes
Table 3.3
© 2006 Prentice Hall, Inc.
3 – 37
Critical Path for
Milwaukee Paper
0
0
0
0
Start
0
A
2
2
2
2
2
C
2
4
4
4
10
0
4
0
4
0
1
B
3
3
3
4
4
D
4
E
4
F
3
7
13
8
13
8
13
H
2
15
15
G
7
8
13
8
8
13
5
Figure 3.13
© 2006 Prentice Hall, Inc.
3 – 38
Questions PERT & CPM
Can Answer
1. When will the entire project be
completed?
2. What are the critical activities or tasks in
the project?
3. Which are the noncritical activities?
4. What is the probability the project will be
completed by a specific date?
© 2006 Prentice Hall, Inc.
3 – 39
Questions PERT & CPM
Can Answer
5. Is the project on schedule, behind
schedule, or ahead of schedule?
6. Is the money spent equal to, less than, or
greater than the budget?
7. Are there enough resources available to
finish the project on time?
8. If the project must be finished in a shorter
time, what is the way to accomplish this
at least cost?
© 2006 Prentice Hall, Inc.
3 – 40
Variability in Activity Times
 CPM assumes we know a fixed time
estimate for each activity and there
is no variability in activity times
 PERT uses a probability distribution
for activity times to allow for
variability
© 2006 Prentice Hall, Inc.
3 – 41
Variability in Activity Times
 Three time estimates are required
 Optimistic time (a) – if everything goes
according to plan
 Most–likely time (m) – most realistic
estimate
 Pessimistic time (b) – assuming very
unfavorable conditions
© 2006 Prentice Hall, Inc.
3 – 42
Variability in Activity Times
Estimate follows beta distribution
Expected time:
t = (a + 4m + b)/6
Variance of times:
v = [(b – a)/6]2
© 2006 Prentice Hall, Inc.
3 – 43
Variability in Activity Times
Probability
Estimate follows beta distribution
Expected time:
t = (a + 4m + b)/6
Probability
oftimes:
Variance
of
1 in 100 of
Probability
< a occurring v = [(b − a)/6]2 of 1 in 100 of
> b occurring
Activity
Time
Optimistic
Time (a)
© 2006 Prentice Hall, Inc.
Most Likely
Time (m)
Pessimistic
Time (b)
3 – 44
Computing Variance
Optimistic
Most
Likely
Pessimistic
Expected
Time
Variance
Activity
a
m
b
t = (a + 4m + b)/6
[(b – a)/6]2
A
B
C
D
E
F
G
H
1
2
1
2
1
1
3
1
2
3
2
4
4
2
4
2
3
4
3
6
7
9
11
3
2
3
2
4
4
3
5
2
.11
.11
.11
.44
1.00
1.78
1.78
.11
Table 3.4
© 2006 Prentice Hall, Inc.
3 – 45
Probability of Project
Completion
Project variance is computed by
summing the variances of critical
activities
sp2 = Project variance
= (variances of activities
on critical path)
© 2006 Prentice Hall, Inc.
3 – 46
Probability of Project
Completion
Project variance is computed by
summing the variances of critical
Project variance
activities
sp2 = .11 + .11 + 1.00 + 1.78 + .11 = 3.11
Project standard deviation
sp =
=
© 2006 Prentice Hall, Inc.
Project variance
3.11 = 1.76 weeks
3 – 47
Probability of Project
Completion
PERT makes two more assumptions:
 Total project completion times follow a
normal probability distribution
 Activity times are statistically
independent
© 2006 Prentice Hall, Inc.
3 – 48
Probability of Project
Completion
Standard deviation = 1.76 weeks
15 Weeks
Figure 3.15
© 2006 Prentice Hall, Inc.
(Expected Completion Time)
3 – 49
Probability of Project
Completion
What is the probability this project can
be completed on or before the 16 week
deadline?
Z = due – expected date /sp
date
of completion
= (16 wks – 15 wks)/1.76
= 0.57
© 2006 Prentice Hall, Inc.
Where Z is the number of
standard deviations the due
date lies from the mean
3 – 50
Probability of Project
Completion
From Appendix I
What is the probability
can
.00
.01 this project
.07
.08
be completed
on or before the
16 week
.1 .50000 .50399
.52790 .53188
deadline?
.2 .53983 .54380
.56749 .57142
.5
.6
date /s
Z.69146
= due .69497
− expected.71566
.71904
p
date
.72575
.72907
.74857
.75175
= (16 wks − 15 wks)/1.76
= 0.57
© 2006 Prentice Hall, Inc.
of completion
Where Z is the number of
standard deviations the due
date lies from the mean
3 – 51
Probability of Project
Completion
Probability
(T ≤ 16 weeks)
is 71.57%
0.57 Standard deviations
15
Weeks
16
Weeks
Time
Figure 3.16
© 2006 Prentice Hall, Inc.
3 – 52
Determining Project
Completion Time
Probability
of 0.99
Probability
of 0.01
2.33 Standard
deviations
From Appendix I
Figure 3.17
© 2006 Prentice Hall, Inc.
0
Z
2.33
3 – 53
What Project Management
Has Provided So Far
 The project’s expected completion time
is 15 weeks
 There is a 71.57% chance the equipment
will be in place by the 16 week deadline
 Five activities (A, C, E, G, and H) are on
the critical path
 Three activities (B, D, F) have slack time
and are not on the critical path
 A detailed schedule is available
© 2006 Prentice Hall, Inc.
3 – 54
Trade-Offs And Project
Crashing
It is not uncommon to face the
following situations:
 The project is behind schedule
 The completion time has been
moved forward
Shortening the duration of the
project is called project crashing
© 2006 Prentice Hall, Inc.
3 – 55
Factors to Consider When
Crashing A Project
 The amount by which an activity is
crashed is, in fact, permissible
 Taken together, the shortened
activity durations will enable us to
finish the project by the due date
 The total cost of crashing is as small
as possible
© 2006 Prentice Hall, Inc.
3 – 56
Steps in Project Crashing
1. Compute the crash cost per time period.
If crash costs are linear over time:
(Crash cost – Normal cost)
Crash cost
per period = (Normal time – Crash time)
2. Using current activity times, find the
critical path and identify the critical
activities
© 2006 Prentice Hall, Inc.
3 – 57
Steps in Project Crashing
3. If there is only one critical path, then
select the activity on this critical path
that (a) can still be crashed, and (b) has
the smallest crash cost per period. If
there is more than one critical path, then
select one activity from each critical path
such that (a) each selected activity can
still be crashed, and (b) the total crash
cost of all selected activities is the
smallest. Note that a single activity may
be common to more than one critical
path.
© 2006 Prentice Hall, Inc.
3 – 58
Steps in Project Crashing
4. Update all activity times. If the desired
due date has been reached, stop. If not,
return to Step 2.
© 2006 Prentice Hall, Inc.
3 – 59
Crashing The Project
Time (Wks)
Activity Normal Crash
A
B
C
D
E
F
G
H
2
3
2
4
4
3
5
2
1
1
1
2
2
2
2
1
Cost ($)
Crash Cost Critical
Normal
Crash Per Wk ($) Path?
22,000
30,000
26,000
48,000
56,000
30,000
80,000
16,000
22,750
34,000
27,000
49,000
58,000
30,500
84,500
19,000
750
2,000
1,000
500
1,000
500
1,500
3,000
Yes
No
Yes
No
Yes
No
Yes
Yes
Table 3.5
© 2006 Prentice Hall, Inc.
3 – 60
Advantages of PERT/CPM
1. Especially useful when scheduling and
controlling large projects
2. Straightforward concept and not
mathematically complex
3. Graphical networks help to perceive
relationships among project activities
4. Critical path and slack time analyses help
pinpoint activities that need to be closely
watched
© 2006 Prentice Hall, Inc.
3 – 61
Advantages of PERT/CPM
5. Project documentation and graphics
point out who is responsible for various
activities
6. Applicable to a wide variety of projects
7. Useful in monitoring not only schedules
but costs as well
© 2006 Prentice Hall, Inc.
3 – 62
Limitations of PERT/CPM
1. Project activities have to be clearly
defined, independent, and stable in their
relationships
2. Precedence relationships must be
specified and networked together
3. Time estimates tend to be subjective and
are subject to fudging by managers
4. There is an inherent danger of too much
emphasis being placed on the longest, or
critical, path
© 2006 Prentice Hall, Inc.
3 – 63
Ethical Issues
 Bid rigging – divulging confidential information
to give some bidders an unfair advantage
 “Low balling” contractors – try to “buy” the
project by bidding low and hope to renegotiate
or cut corners
 Bribery – particularly on international projects
 Expense account padding
 Use of substandard materials
 Compromising health and safety standards
 Withholding needed information
 Failure to admit project failure at close
© 2006 Prentice Hall, Inc.
3 – 64
Using Microsoft Project
Program 3.1
© 2006 Prentice Hall, Inc.
3 – 65
Using Microsoft Project
Program 3.2
© 2006 Prentice Hall, Inc.
3 – 66
Using Microsoft Project
Program 3.3
© 2006 Prentice Hall, Inc.
3 – 67
Using Microsoft Project
Program 3.4
© 2006 Prentice Hall, Inc.
3 – 68
Using Microsoft Project
Program 3.5
© 2006 Prentice Hall, Inc.
3 – 69
Using Microsoft Project
Program 3.6
© 2006 Prentice Hall, Inc.
3 – 70
Using Microsoft Project
Program 3.7
© 2006 Prentice Hall, Inc.
3 – 71

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