Operations Management

Project Management Chapter 3

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Chris Schrage, OPS

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Project organization and planning is most beneficial…..

Defined goals and deadline Unique to existing organization Complex interrelated tasks Temporary but critical to organization Utilization of various organizational groups

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1 Examples of Projects

X Building Construction

X Research Project

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Project Management Activities

X Planning X Scheduling X Objectives X Project activities X Resources X Start & end times X Work break-down schedule X Network X Organization

X Controlling X Monitor, compare, revise, action

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Ethical issues

Gifts from contractors Pressure to mask delay problems False reporting Pressure to compromise quality Bid rigging Lowballing Bribery Providing wrong or inaccurate information Inability to admit project failure

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2 A Sample Project Organization

President

Human Quality Marketing Finance Design Production Resources Mgt

Project 1 Project Manager Mechanical Test Technician Engineer Engineer

Project 2 Project Manager Electrical Computer Technician Engineer Engineer

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Matrix Organization

Marketing Operations Engineering Finance

Project 1

Project 2

Project 3

Project 4

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The Role of the Project Manager

Highly visible Responsible for makPirnogje cstu mrea ntahgaetr:s should be: X Good coaches X All necessary activities are finished in order and on time X Good communicators X The project comeXs inA bwliet htoin o brugdagneizte activities from a variety of disciplines X The project meets quality goals X The people assigned to the project receive motivation, direction, and information

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3 Breaking down work (WBS)

Level 1. Project 2. Major tasks in the project 3. Subtasks in major tasks 4. Activities or work —groupings“

Practical method for organizing the project, provides foundation for various scheduling techniques

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Project scheduling beneficial… Relationship of activities to one another Identifies precedence relationships Sets realistic time and cost estimates Allow for better use of all recourses Helps to determine bottlenecks (constraints) Especially true if multiple projects require same set of resources

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Gantt Charts

All activities planned Order of performance determined Activity time estimates recorded Overall project time developed Does not indicate interrelationship of tasks

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4 A Simple Gantt Chart

Time J F M A M J J A S

Design Prototype Test Revise Production

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Project controlling

Monitoring systems Cost Resources Quality Budgets

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PERT

Program Evaluation & Review Technique Schedule Monitor Control Utilizes various time elements § Optimistic § Pessimistic § Most likely

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5 Booz, Allen, Hamilton

Edwin G. Booz James L. Allen Carl L. Hamilton

Company founded in 1914 by Edwin Booz in Chicago. Evolved into global consulting firm after Allen joined him in 1929 and Hamilton joined in 1935. 1940 began consulting work for U.S. Army and U.S. Navy In 1958, the company took on a Navy project for Polaris missile, resulting in the PERT program used world wide today. Currently, 16,000 employees on 6 continents delivering consultation on strategy and technology Ranked 72 of 100 best places to work in the U.S. 16 Chris Schrage, OPs

CPM

Critical Path Method 1957 First used for construction and maintenance of DuPont Chemical plants Assumes activity times are known Only one time factor per activity is considered

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Basic Steps

Define Project- breakdown tasks

Develop activity relationships and order

Draft network of all activities

Assign activity times and costs

Compute Critical Path

Utilize information to plan, schedule, monitor, and control

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6 Network Diagrams Activities or events

Activity on NODES

A B C D

Activity on ARROWS

A B C D

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Activity Meanings (see figure 3.5)

B Event A must be completed prior to the A start of B and/or C C

A Both events A and B must be complete C prior to the start of C

B

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Month School Board Faculty Students Chris Schrage Community August Select Site Transfer Funds

Purchase materials Draw plans Establish separate bank construct market research account guidelines Begin construction September Monitor progress of Choose students for carry out market answer market research construction project course research surveys begin textbook development questions begin discussions for provide support to market scholarship allocation determine faculty research and other issues via guidelines advisor for students choose store name email continue construction October consider a fundraising Monitor progress of monitor accuracy of the compile data project to purchase initial construction data gathered gathered support inventory continue discussions for plan trips to distributors scholarship allocation to set up accounts and determine type of guidelines relationships products to inventory text book development construction

determine quantities of inventory choose paint color scheme and volunteer to staff mini- decoration store during school hours November meet with product plan trips to distributors distributors to finalize formula for to set up accounts and determine price and scholarship guidelines relationships order quantities text book edited for printing complete construction paint facility support paint facility December help procure funds for help procure funds help procure funds for initial help procure funds for announce program initial inventory for initial inventory inventory initial inventory

help procure funds for find what suppliers initial inventory provide free signs text book printed 21 Chris Schrage, OPs

7 Activity Table œMini-Store Immediate Activity Description Predecessors A Approval of PTA and School Board B Site Selection A C Develop blueprints/ project guidelines D Materials List C E Obtain quotes on material costs D F Carry out market research A G Choose contractors E H Purchase construction materials E I Build facility G,H J Purchase inventory F K Open Store J,I 22 Chris Schrage, OPs

Mini-Store Project Network

F J

A B K G D E I C H

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Determining the Project Schedule

Perform a Critical Path Analysis

Earliest start (ES) = earliest time at which an activity can Activity Descrispttaiortn, assuming all predecesTsimores (hwaeveek s) A Build ibneternn caol mcopmlepteodnents 2 EarliestB finish (MEFo)d =ifye arorloief satn tdim fleo aotr which an activity c3an be C Constrfiuncist hceodllection stack 2 LatesDt start (PLSou) r= cloatnecsrte ttiem aen adt iwnshtiaclhl farnam acetivity can4 start E Build hsiog has-t etom npoetr adteulraey b tuhren ceormpletion 4time of F Install tphoe lleunttiiorne pcoronjtercotl system 3 LatestG finish (ILnFs)t a=lll atire spto tlilmuteio bny d wehviceh an activity ha5s to be finished so as to not delay the H Inspect and test 2 completion time of the entire project Total Time (weeks) 25Table 3.2

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8 Mini-Store Time Estimates

Activity Description Time- Days A Approval of PTA and School Board 5 B Site Selection 2 C Develop blueprints/ project guidelines 1 D Materials List 1 E Obtain quotes on material costs 2 F Carry out market research 30 G Choose contractors 4 H Purchase construction materials 5 I Build facility 120 J Purchase inventory 10 K Open Store 3

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Mini-Store Forward Pass 10 30

35 F 5 J 3 5 2 4 K A B 5 10 0 G 135 1 2 120

1 D E 8 I 7 5 15 C 0 H 10

26 Chris Schrage, OPs Activity Time Earliest Start

Mini-Store Backward Pass 10 30

35, 145 F 5,135 J 3 5 2 4 K A B 5,5 10,11 0,0 G 135 1 2 120 135

1 D E 8,8 I 7,7 5 15,15 C 0, 6 H 10,10

27 Chris Schrage, OPs Activity Time Earliest Start Latest Start

9 Mini-Store Critical Path- A,B,D,E,H,I,K 10 30

35, 145 F 5,135 J 3 5 2 4 K A B 5,5 10,11 0,0 G 135 1 2 120 135

1 D E 8,8 I 7,7 5 15,15 C 0, 6 H 10,10

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Pert Time Estimates

Optimistic time Everything goes exactly as planned Only a small probability of happening Pessimistic time Unfavorable conditions abound Only a small probability of occurring Most Likely time Most realistic estimate of project completion Experience provides a —sense“ of what types of challenges will prevent optimistic time from occurring Intuitive thinking is helpful in determining this time.

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Beta Probability Distribution

T= (Optimistic + 4 most likely + Pessimistic) 6

50 45 40 35 30 25 20 15 10 5 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

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10 Cost-Time Trade-Offs

Possible scenarios for a manager The project is behind schedule Project time has been shortened or —moved forward“ § Must speed up all remaining activities

CRASHING

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CPM times

Normal (standard) time = Normal Cost

Crash time = Crash Cost

Crash time generally means more expense as more resources often need to be utilized

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Four steps to crashing

Compute crash cost per time unit Crash cost = (crash cost-normal cost) (normal time- crash time) Find critical path using original activity times Select activities on critical path(s) Crash able Has smallest crash costs Update activity times to reflect desired due date

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11 Crash and Normal Times and Costs Example

Activity Cost Crash Crash Cost – Normal Cost $34,000 — Crash Cost/Wk = Normal Time – Crash Time Crash $33,000 — $34,000 – $30,000 = Cost 3 – 1 $32,000 — $4,000 = = $2,000/Wk $31,000 — 2 Wks

$30,000 — Normal Normal — Cost | | | 1 2 3 Time (Weeks) Crash Time Normal Time 34 Chris Schrage, OPs

PERT & CPM

Advantages Limitations Useful for large projects Activities must be clearly Straightforward- not defined mathematically complex Relationships must be Networks highlight properly networked activity relationships together Critical path analysis § Proper order identifies areas needing Time estimates are most monitoring subjective Documentation provides § Subject to fudging accountability Inherent danger of Useful for various types focusing on critical path of projects § Loose control over Helps to monitor non-critical items progress and budgets

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Microsoft Project

Creating a Project Schedule Define new project Enter Activity Information Define Precedence Relationships View the Project Schedule Track Progress and Manage Costs

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12 Using Microsoft Project

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Using Microsoft Project

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Using Microsoft Project

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13 Using Microsoft Project

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Using Microsoft Project

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Using Microsoft Project

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14 Using Microsoft Project

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Valuable tools

Just that- TOOLS Provide understanding Tasks Schedules Budgets Resource needs Ease in communication DO NOT SOLVE management‘s project problems Only a tool for making better decisions

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