Course Notes Operations Management Project Management

6:Project Management

Charles E. Oyibo

Introduction

A project is a unique, one-time operation designed to accomplish a set of objectives in a limited time frame. Most projects are expected to be completed within time, cost, and performance guidelines. To accomplish this, goals must be established, priorities set, tasks identified, and time estimated made. Resource requirements also must be projected and budgets prepared. Once underway, progress must be monitored to assure that the project goals and objectives will be achieved.

The Nature of Projects

Projects go through a series of stages--a life cycle--which include:

• project definition,
• planning,
• execution of major activities, and
• project phase-out

Key Decisions in Project Management

• Deciding which projects to implement.
• Selecting the project manager.
• Selecting the project team.
• Planning and designing the project.
• Managing and controlling project resources.
• Deciding if and when a project should be terminated.

The Project Manager

The project manager is responsible for effectively managing each of the following:

1. The work, so that all of the necessary activities are accomplished in the desired sequence, and performance goals are met.
2. The human resources, so that those working on the project have direction and motivation.
3. Communication, so that everybody has the information they need to do their work.
4. Quality, so that performance objectives are realized.
5. Time, so that the project is completed on schedule.
6. Costs, so that the project is completed within budget.

Project Life Cycle

1. Definition, which has two parts: (a) Concept, at which point the organization recognizes the need for a project, or responds to a request for proposal from a potential customer or client, and (b) Feasibility Analysis, which examines the expected costs, benefits, and risks of undertaking the project.
2. Planning, which spells out the details of the work and provides estimates of the necessary human resources, time, and cost.
3. Execution, during which the project itself is done. This phase often accounts for the majority of the time and resources consumed by a project.
4. Termination, during which closure is achieved. Termination can involve reassigning personal and dealing with any leftover material, equipment (e.g. selling or transfering equipment), and any other resources associated with the project.

Risk Management

Though careful planning can reduce risks, no amount of planning can eliminate chances of events due to unforeseen, or uncontrollable, circumstances.

The probability of occurence of risk events if higher near the beginning of a project and lowest near the end. However, the cost associated with risk events tend to be lower near the begining of a project and highest near the end.

Good risk management entails:

• Identifying as many potential risks as possible,
• Analyzing and assessing those risks (to determine the probability and consequences of their occurence),
• Working to minimize the probability of their occurence, and
• Establishing contingency plans (and funds) for dealing with any that do occur.

Work Breakdown Structure (WBS)

WBS is a hierarchical listing of what must be done during the project. This methodology establishes a logistical frameworkf for identifying the required activities for the project: The steps for developing a WBS are:

1. Identify the elements of the project
2. Identify the supporting activities for each of the elements of the project
3. Break down each supporting activity into a list of activities that needs to be accomplished

Planning and Scheduling with Gantt Charts

The Gantt chart enables a manager to initially schedule project activities and then to monitor progress over time by comparing planned progress to actual progress.

PERT and CPM

PERT (project evaluation and review technique) and CPM (critical path method) are techniques that are used for planning and coordinating large-scale projects. Using PERT and CPM, managers are able to obtain:

1. A graphical display of project activities.
2. An estimate of how long the project will take.
3. An indication of which activities are the most critical to timely project completion.
4. An indication of how long any activity can be delayed without delaying the project.

The Network Diagram

Network or precedence diagrams are used to depict major project activities and their sequential relationships by use of arrows and nodes. Some definitions will suffice here:

• Activity-on-Arrow (AOA) is a network diagrams convention in which arrows designate activities.
• Activity-on-node (AON) is a network diagrams convention in which nodes designate activities.
• Activities are project steps that consume resources and/or time.
• Events are the starting and finishing of activities, designated by nodes in the AOA convention.
• Path is a sequence of activities that lead from the starting node to the finishing node.
• Critical path is the longest path; it determined expected project duration.
• Critical activities are activities on the critical path.
• Slack is allowable slippage for a path; the difference between the lenght of a path and the lenght of the critical path.

Deterministic vs. Probabilistic Time Estimates

If time estimates can be made with a high degree of confidence that actual times are fairly certain, we say the estimated deterministic. If actual times are subject to variation, we say the estimtes are probabilistic. Probabilitistic times estimates must include an indication of the extent of probable variation.

A Computing Algorithm

Planners use an algorithm to develop four pieces of information about netwek activites:

• ES, the earliest time activity can start, assuming all preceding activities start as early as possible.
• EF, the earliest time the activity can finish.
• LS, the latest time the activity can start and not delay the project.
• LF, the latest time activity can finish and not delay the project.

Once these values have been determined, they can be used to find:

1. Expected project duration
2. The Critical Path
3. Slack time

Probabilistic Time Estimates

The probabilistic approach involves three time estimates for each activity instead of one (as with the deterministic approach):

1. Optimistic time: The lenght of time required under optimum conditions; represented by t₀.
2. Pessimistic time: The lenght of time required under the worst conditions; represented by t_p.
3. Most likely time: The most probable amount of time required; represented by t_m.

The expected time of an activity, t_e, is a weighted average of the three estimates:

t_e = (t_o + 4t_m + t_p) ÷ 6

Technology

Project management software packages:

• CA-Super Project
• Harvard Total Project Manager
• Microsoft Project for Windows
• Time Line

Simulation

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Time-Cost Trade-Off: Crashing

It is often possible to reduce the lenght of a project by injecting additional resources. Managers often have certain options to shorten, or crash, certain activities, such as using additional funds to support additional personnel or more efficient equipment, and relaxing of some work specifications. Hence a project manager may be able to shorted a project by increasing direct expenses to speed up the project, thereby realizing savings on indirect project costs.

Activites on the critical path are potential candidates for crashing; reallocating resources from non-critical activities to critical activities will invariably shorten the critical path, and consequently, the duration of the project. From an economic standpoint, activities should be crashed according to (or, in order of increasing) crashing costs: Crash those with the lowest crashing costs first. Moreover, crashing should continue as long as the cost to crash is less than the benefits derived from crashing.

Note that two or more paths may become critical as the original critical path becomes shorter, so that subsequent improvements will require simultaneous shorting of two or more paths.

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