OPERATIONS MANAGEMENT

for MBAs Second Edition

Meredith and Shafer
Prepared by
Scott M. Shafer
Wake Forest University

John Wiley and Sons, Inc.

Chapter 12: Project Management

Chapter 12: Project Management

Introduction

Chapter 12: Project Management

Previous Examples of Projects

Transporting Olympic Flame (Chapter 1)
Product Development Projects in Chapter 4

(Thermoss electric grill)

Mercedes-Benz facility location (Chapter 6)

Chapter 12: Project

Management

Viper Development Project

Project team given 3 years to go from

concept to roadster.
Needed to develop new 8.0-litter V-10
aluminum engine and new high performance
six-speed transmission.
Comparable projects usually require five years
at Chrysler.

Chapter 12: Project

Management

Viper Development Project

continued
Project team members hand-picked.
Artemis Prestige selected to help manage

project

ability to track several projects concurrently

interactive use
provide broad picture of entire project
help identify the impact of each activity on the
ultimate completion of the project
Chapter 12: Project
Management

Viper Development Project: An

Overwhelming Success
First test engine required less than a year to

develop.
Transmission developed in 1.5 years
compared to the usual 5 to 6 years.
Many important innovations in the frame,
body, and brakes were incorporated .

Chapter 12: Project

Management

Zeneca Pharmaceuticals
Mission is the development of new drugs

for the medical community.

The development of a new drug is a
complex project with typical durations of 10
years.

Chapter 12: Project

Management

Zeneca Pharmaceuticals: Major

Steps in Drug Development
Preclinical Testing
Investigational New Drug
Human Clinical Testing
three separate phases
New Drug Application
Approval

Chapter 12: Project

Management

Differences Between Pharmaceutical

R&D Projects and Other Industries
Final product is information rather than a

physical product.
Long duration, extreme costs, and high
chances for failure.

Chapter 12: Project

Management

10

Background
Project management concerned with

managing organizational activities.

Often used to integrate and coordinate
diverse activities.
Projects are special types of processes.

Chapter 12: Project

Management

11

Examples of Projects
Constructing highways,

bridges, tunnels and dams

Erecting skyscrapers, steel
mills, and homes
Organizing conferences
and conventions
Managing R&D projects
Running political
campaigns, war operations,
and advertising campaigns

Chapter 12: Project

Management

12

Reasons for Growth in Project

Operations
More Sophisticated

Technology
Better-Educated Citizens
More Leisure Time
Increased Accountability
Higher Productivity
Faster Response to
Customers
Greater customization for
customers
Chapter 12: Project
Management

13

Planning the Project

Chapter 12: Project Management

14

Life Cycle of a Project

(Stretched-S)

Chapter 12: Project

Management

15

Life Cycle of a Project

(Exponential)

Chapter 12: Project

Management

16

Organizing the Project Team

Ad Hoc Project Form
Weak Functional Matrix
Strong Project Matrix

Chapter 12: Project

Management

17

Types of Project Team Members

Those having a long-term relationship with

the project.
Those that the PM will need to
communicate with closely.
Those with rare skills necessary to project
success.

Chapter 12: Project

Management

18

Work Breakdown Structure

Chapter 12: Project

Management

19

Project Master Schedule

Chapter 12: Project

Management

20

Complexity of Scheduling
Project Activities
Large number of activities
Precedence relationships
Limited time of the project

Chapter 12: Project

Management

21

Planning and Scheduling Projects

Planning. Determining what must be done

and which tasks must precede others.

Scheduling. Determining when the tasks
must be completed; when they can and
when they must be started; which tasks are
critical to the timely completion of the
project; and which tasks have slack and how
much.
Chapter 12: Project
Management

22

Scheduling the Project: PERT

and CPM

Chapter 12: Project Management

23

Terminology
Activity
Event
Network
Path
Critical Path
Critical Activities
Dummy Activities
Chapter 12: Project
Management

24

Project Planning When Activity

Times are Known

Inputs
activity completion times
activity precedence relationships
Outputs
graphical representation of project
time to complete project
identification of critical path(s) and activities
activity and path slack
earliest start, earliest finish, latest start, and latest finish times
for each activity

Chapter 12: Project

Management

25

Example
Activity Time Preceded By
A
10
-B
7
-C
5
A
D
13
A
E
4
B,C
F
12
D
G
14
E
Chapter 12: Project
Management

26

Network Diagram
A(10)

4
D(13)

F(12)

C(5)

B(7)
E(4)

3
Paths

G(14)

Time Slack

A-D-F

35

A-C-E-G

33

B-E-G

25

10

critical path

27

Early Start and Finish Times

Chapter 12: Project

Management

28

Latest Start and Finish Times

Chapter 12: Project

Management

29

Activity Slack Time

TES = earliest start time for activity
TLS = latest start time for activity
TEF = earliest finish time for activity
TLF = latest finish time for activity
Activity Slack = TLS - TES = TLF - TEF
Chapter 12: Project
Management

30

Path Slack

Duration of Critical Path

- Path Duration
Path Slack

Chapter 12: Project

Management

31

Activity Slack Times

Activity
A
B
C
D
E
F
G

ES
0
0
10
10
15
23
19

EF LS LF Slack
10 0 10
0
7 10 17
10
15 12 17
5
23 10 23
0
19 17 21
2
35 23 35
0
33 21 35
2

Chapter 12: Project

Management

32

Project Planning When Activity

Times are Uncertain
Inputs
Optimistic (to), most likely (tm), and pessimistic (tp)
time estimate for each activity
activity precedence relationships
Outputs
graphical representation of project
expected activity and path completion times
variance of activity and path completion times
probability that project completed by specified time
Chapter 12: Project
Management

33

Expected Activity Time and

Variance of Activity Time
te

t o 4t m t p
6

t p to

Chapter 12: Project

Management

34

Example
Activity Preceded By to

tm

tp

te

--

5.50

.694

--

7.00

.444

4.83

.250

10

10

10

10.0

0.000

B,C

4.0

.111

12

13

11.5

.913

4.33

1.000

Chapter 12: Project

Management

35

Network Diagram with Expected

Activity Times and Variances
[5.5,
0.694]

1
[7.0,
0.444]

A
B

2 [10, 0.0]

[11.5, 0.913]

C [4.83,
0.250]

6
E

G
[4.33, 1.0]

[4.0,
0.111]

Chapter 12: Project

Management

36

Expected Completion Time and

Variance of Path A-D-F
Expected completion time = 5.5 + 10 + 11.5
= 27

Path Variance = 0.694 + 0 + 0.913 = 1.607

Chapter 12: Project
Management

37

Path Expected Times and

Variances
Path

Expected
Standard
Time
Variance Deviation

A-D-F

27

1.607

1.27

A-C-E-G

14.66

2.055

1.43

B-E-G

15.33

1.555

1.25

Chapter 12: Project

Management

38

Probabilities of Completion

desired completion time - expected completion time

z
V

Chapter 12: Project

Management

39

Probability of Project Being

Completed on or Before Time 25
Only path A-D-F has reasonable
chance of taking 25 or more:

25 27
z
157
.
1.27
From standard normal table in Appendix A,
there is a 5.82% chance of completing
project on or before time 25.
Chapter 12: Project
Management

40

Probability of Path A-D-F being

Completed on or Before Time 25

5.82%

Chapter 12: Project

Management

41

Plan E Project Operations

Network

Chapter 12: Project

Management

42

Proper Use of Dummy Activities

Chapter 12: Project

Management

43

Activity Expected Times and

Variances

Chapter 12: Project

Management

44

Simulating Project Completion

Times with Spreadsheets
C
A

Chapter 12: Project

Management

45

Simulating Project Completion

Times
Activity
A

Mean (days)
32.1

Standard
Deviation
1.2

24.6

3.1

22.2

2.2

26.1

5.2

34.4

6.2

34.5

4.1

Chapter 12: Project

Management

46

Activity Activity Activity Activity Activity

A
B
C
D
E

Activity
F

Path1 Path 2
(A-C-F) (B-D-F)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Chapter Minimum
12: Project
Maximum
Management

Path 3
(B-E)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Project
Finish Time
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

47

Chapter 12: Project

Management

48

Chapter 12: Project

Management

49

Activity Activity Activity Activity Activity

A
B
C
D
E
30.80
31.91
32.21
32.65
31.91
34.78
32.07
29.27
30.26
30.55
32.17
31.74
32.15
33.23
31.05
34.07
32.81
30.39
33.99
31.18
32.17
32.94
30.94
31.15
32.25

Activity
F

Path1 Path 2
(A-C-F) (B-D-F)
30.80
0.00
31.91
0.00
32.21
0.00
32.65
0.00
31.91
0.00
34.78
0.00
32.07
0.00
29.27
0.00
30.26
0.00
30.55
0.00
32.17
0.00
31.74
0.00
32.15
0.00
33.23
0.00
31.05
0.00
34.07
0.00
32.81
0.00
30.39
0.00
33.99
0.00
31.18
0.00
32.17
0.00
32.94
0.00
30.94
0.00
31.15
0.00
32.25
0.00
29.27
0.00
34.78
0.00

ChapterMinimum
12: Project
Maximum
Management

Path 3
(B-E)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Project
Finish Time
30.80
31.91
32.21
32.65
31.91
34.78
32.07
29.27
30.26
30.55
32.17
31.74
32.15
33.23
31.05
34.07
32.81
30.39
33.99
31.18
32.17
32.94
30.94
31.15
32.25
29.27
34.78

50

Activity Activity Activity Activity Activity

A
B
C
D
E
30.80
18.57
23.00
30.58
39.13
31.91
25.65
25.00
26.64
39.65
32.21
23.30
20.97
33.93
29.43
32.65
19.35
16.53
31.36
24.52
31.91
20.69
23.51
27.48
28.52
34.78
21.48
20.99
24.39
38.38
32.07
28.65
20.76
30.02
35.64
29.27
27.70
20.93
21.12
42.70
30.26
19.01
25.00
19.11
44.07
30.55
22.83
18.65
11.08
33.58
32.17
21.70
24.19
21.25
35.78
31.74
19.48
22.75
28.11
28.60
32.15
26.80
20.63
19.65
37.05
33.23
21.96
22.69
17.70
50.66
31.05
23.12
21.86
31.91
32.60
34.07
28.74
20.97
25.75
38.23
32.81
26.78
20.64
24.36
31.34
30.39
25.52
21.09
28.20
40.22
33.99
23.37
21.29
30.02
30.31
31.18
23.37
21.19
23.66
30.58
32.17
16.62
22.20
25.22
35.10
32.94
24.57
20.54
26.38
14.15
30.94
23.71
26.54
22.24
35.23
31.15
28.24
22.96
33.34
37.54
32.25
28.28
24.06
29.06
31.22

Activity
F
28.68
35.16
34.91
35.08
29.13
33.23
34.28
40.94
33.54
30.46
34.60
28.96
35.27
26.21
32.37
31.79
41.62
39.79
38.59
45.35
32.37
34.34
32.73
30.14
31.98
Minimum
Maximum

Path1 Path 2
(A-C-F) (B-D-F)
82.48
77.83
92.06
87.45
88.09
92.14
84.26
85.79
84.55
77.30
89.00
79.10
87.11
92.95
91.15
89.75
88.80
71.66
79.66
64.36
90.96
77.55
83.45
76.56
88.06
81.72
82.13
65.86
85.29
87.40
86.82
86.28
95.07
92.76
91.28
93.51
93.87
91.98
97.72
92.39
86.74
74.21
87.82
85.29
90.20
78.68
84.25
91.71
88.29
89.32
79.66
64.36
97.72
93.51

Chapter 12: Project

Management

Path 3
(B-E)
57.70
65.30
52.73
43.87
49.21
59.86
64.29
70.40
63.09
56.40
57.47
48.08
63.85
72.62
55.72
66.97
58.12
65.74
53.68
53.95
51.72
38.72
58.94
65.78
59.50
38.72
72.62

Project
Finish Time
82.48
92.06
92.14
85.79
84.55
89.00
92.95
91.15
88.80
79.66
90.96
83.45
88.06
82.13
87.40
86.82
95.07
93.51
93.87
97.72
86.74
87.82
90.20
91.71
89.32
79.66
97.72

51

Project Management Software

Capabilities

Chapter 12: Project Management

52

Microsoft Projects Gantt Chart

Chapter 12: Project

Management

53

Pert Chart Generated by

Microsoft Project

Chapter 12: Project

Management

54

Calendar of Activities Created by

Microsoft Project

Chapter 12: Project

Management

55

Controlling the Project: Cost and

Performance

Chapter 12: Project Management

56

Variance Report
Cost standard determined using engineering

estimates or analysis of past performance

Actual cost monitored and compared with
cost standard
Project manager can exert control if
difference between standard and actual
(called a variance) is considered significant.
Chapter 12: Project
Management

57

Cost-Schedule Reconciliation
Charts

Chapter 12: Project

Management

58

Earned Value Chart

Chapter 12: Project

Management

59

Goldratts Critical Chain

Chapter 12: Project Management

60

Introduction
Similar issues that trouble people about working on

projects regardless of type of project

unrealistic due dates

too many changes
resources and data not available
unrealistic budget

These issues/problems related to need to make

trade-offs
To what extent are these problems caused by human
decisions and practices?
Chapter 12: Project
Management

61

Three Project Scenarios

Chapter 12: Project

Management

62

Project Completion Time Statistics Based on

Simulating Three Projects 200 Times

Average
Std Dev
Max
Min
Median

Scenario 1 Scenario 2 Scenario 3

50.4
51.9
53.4
7.1
6.3
5.3
69.4
72.7
69.3
30.1
36.1
39.3
50.0
51.8
53.1

Chapter 12: Project

Management

63

Observations
Average Completion Times
Implications of Assuming Known Activity

Times
Shape of the Distribution
Worker Time Estimates
Impact of Inflated Time Estimates
Student Syndrome
Chapter 12: Project
Management

64

Multitasking

Chapter 12: Project

Management

65

Alternative Gantt Charts for

Projects A and B

Chapter 12: Project

Management

66

Common Chain of Events

Underestimate time needed to complete

project

assumption of known activity times and

independent paths

Project team members inflate time estimates

Work fills available time
student syndrome
early completions not reported
Chapter 12: Project
Management

67

Common Chain of Events

continued
Safety time misused
Misused safety time results in missed

deadlines
Hidden safety time complicates task of
prioritizing project activities
Lack of clear priorities results in poor
multitasking
Chapter 12: Project
Management

68

Common Chain of Events

concluded
Poor multitasking increases task durations
Uneven demand on resources also results

due to poor multitasking

More projects undertaken to ensure all
resources fully utilized
More projects further increases poor
multitasking
Chapter 12: Project
Management

69

Reversing the Cycle

Reduce number of projects assigned to each

individual
Schedule start of new projects based on
availability of bottleneck resources
Reduce amount of safety time added to individual
tasks and then add some fraction back as project
buffer
activity durations set so that there is a high probability
the task will not be finished on time
Chapter 12: Project
Management

70

The Critical Chain

Longest chain of consecutively dependent

events
considers both precedence relationships and
resource dependencies

Project Buffer
Feeding Buffer

Chapter 12: Project

Management

71

Sample Network Diagram

Chapter 12: Project

Management

72

Figure 6-25 Project and Feeder

Buffers

Chapter 12: Project

Management

73

Copyright
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Chapter 12: Project

Management

74