Managing Projects

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 2

Project Management:Why Do It?

Kuwait, After the Gulf War (1990):

• 650 burning oil wells

• No water, food, electricity or facilities

• Oil-covered roads, blazing

• Thousands of unexploded bombs, mines, artillery shells and grenades

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 3

Bechtel Construction:

• Mobilized workforce of 9,000• Deployed 125,000 tons of equipment and

supplies• Built 150 km of pipeline delivering 20

million gallons of water per day to the fires

• Served 27,000 meals per day• Established storage, docking, and

warehouse facilities in Dubai

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 4

What Is a Project?

A series of related tasks directed toward some major output or goal

Often driven by a completion deadline

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 5

Project Phases

• Concept– Broad definition and feasibility analysis– Budget estimates within 30%

• Project definition– Tentative schedules, budgets,

organization– Budget estimates refined within 5%

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 6

Project Phases (cont’d)

• Planning phase– Detailed tasks, timing, budgets &

resources– Project management tools

• Performance phase– Execution and control

• Post completion

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 7

Work Breakdown Structure (WBS)

Level 1 Program 2 Project 3 Task (group or organization)

4 Subtask 5 Work Assignment

(organizational unit)

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 8

Work Breakdown Structure Example

Level 1 Custom Home Builder 2 Custom Home 3 Foundation (group or organization)

4 Concrete work 5 Set-up forms

(organizational unit)

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 9

Breaking Down the Work

• Allows independent operation

• Improves manageability

• Decentralizes authority

• Enables monitoring and measurement

• Provides assessment of required resources

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 10

Tools for Project Control: Gantt Charts

...But there is no detailed information about interrelationships

ID Task Name Start Finish DurationApr 2005

4 5 6 7 8 9 10 11 12 13 14 15 16 17

1 3d4/6/20054/4/2005Activity 12 3d4/8/20054/5/2005Activity 23 2d4/11/20054/7/2005Activity 34 5d4/15/20054/8/2005Activity 45 1d 4h4/14/20054/13/2005Activity 56 1d4/18/20054/15/2005Activity 6

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 11

Tools for Project Control

• Network techniques• Consider precedence relationships• Capture interdependency of

activities• Determine critical path(s)

– Sequence(s) of activities that determines overall duration of the project

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 12

Critical Path Method (CPM)Consider the following consulting project:

Develop a critical path diagram and determine the duration of the critical path and slack times for all activities

Activity Designation Immediate Predecessor(s)

Duration (weeks)

Assess customer’s needs A None 2

Write and submit proposal B A 1

Obtain approval C B 1

Develop service vision and goals D C 2

Train employees E C 4

Quality improvement pilot groups F D, E 5

Write assessment report G F 1

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 13

This activity-on-node (AON) diagram shows the precedence

relationships ...

. . .as well as the length of each activity. Do you see the two paths through the network?

A, 2 B, 1 C, 1

D, 2

E, 4

F, 5 G, 1START FINISH

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 14

Some Definitions

• Earliest Start Time (ES)= Latest EF for all immediate predecessors

• Earliest Finish Time (EF)= ES + activity’s duration

• Latest Start Time (LS)= LF – activity’s duration

• Latest Finish Time (LF)= Earliest LS for all immediate successors

• Slack = amount of allowable delay in an activity= Equal to LS – ES or LF – EF for an activity

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 15

Insights

• A ‘hit’ to a critical activity will make project late

• Rational time estimates needed

• Slack activities can start later

• Difference between effort-driven and time-driven activities

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 16

Some Assumptions

• Project activities can be identified as entities. (There is 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 (activities with no slack)

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 17

In First Example ...

• Network-based scheduling techniques to:

Show precedence Determine project duration Identify critical paths and activities

• Setting EF = LF for last activity implies that current length of project is OK

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 18

However, there are often ...

• Deadlines for finishing projects– (Olympic stadium, dormitories, etc.)

• Penalty or overhead costs– (Bechtel Construction)

• Competitive pressures– Product launch

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 19

Ways to Shorten (Crash) a Project

• STEAL resources from non-critical activities

• MORE resources

• MORE hours

• MORE $$$$

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 20

Idea behind “CRASHING”

Duration of individual effort-driven activities can be shortened, but at a cost

Example: Following project must be completed by Week 26

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 21

Activity Duration Predecessors Crashable Weeks Cost per Week

A 6 None None

B 11 A 4 $700

C 14 A 3 $2,000

D 2 A None

E 4 B 1 $2,000

F 5 B 1 $1,000

G 6 C 1 $1,000

H 7 C 2 $2,000

I 3 D None

J 4 E None

K 4 F, G 2 $1,500

L 3 H, I 1 $2,500

Project Data

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 22

Network Diagram for Project

A, 6

E, 4

C, 14

F,5

H, 7

L, 3

J, 4

START FINISH

D, 2

B, 11

G, 6

I, 3

K, 4

17 21

22 26

E

L

S F

17 22

21 26

E

L

S F

21 25

26 30

E

L

S F

26 30

26 30

E

L

S F

6 17

10 21

E

L

S F

6 20

6 20

E

L

S F

27 30

27 30

E

L

S F

20 26

20 26

E

L

S F

8 11

24 27

E

L

S F

30 30

30 30

E

L

S F

6 8

22 24

E

L

S F

20 27

20 27

E

L

S F

0 0

0 0

E

L

S F

0 6

0 6

E

L

S F

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 23

1. Write Down All Possible Paths and Lengths of Time

Path Length

ABEJ 25

ABFK 26

ACGK 30

ACHL 30

ADIL 14

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 24

2. Identify All Paths to be Shortened

Path Length

ABEJ 25

ABFK 26

ACGK 30 Critical Path

ACHL 30 Critical Path

ADIL 14

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 25

3. Find Lowest-Cost Way to Shorten Critical Path(s)

Path Length

ABEJ 25

ABFK 26

ACGK 30

ACHL 30

ADIL 14

To CRASH, either:

1. Shorten C or

2. Shorten {G or K} and {H or L}

• Shorten C by 3 weeksCost = 3×$2,000 = $6,000

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 26

Update Lengths in Table

Path Length

ABEJ 25

ABFK 26

ACGK 3027

ACHL 3027

ADIL 14

Are we done?

What are ournext cheapestalternatives?

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 27

To Crash Further

1. Shorten C, or

2. Shorten {G or K} and {H or L}

• Shorten Both G and H by 1 Week:

• Cost = $1,000 + $2,000 = $3,000

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 28

Update Lengths in Table

Path Length

ABEJ 25

ABFK 26

ACGK 302726

ACHL 302726

ADIL 14

Total Cost to Crash= $6,000 + $3,000= $9,000

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 29

If overhead per week is $4000

How many more weeks should the company try to crash the

project?

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 30

Observations

• Cost of crashing becomes more and more expensive as cheapest options are used up

• There is a limit to how far a project can be crashed.

• Crashing non-critical activities is pointless

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 31

Controlling Projects

CPM used primarily to Plan and Schedule, BUT ...

• Things rarely go as planned

• Additional activities arise

• Better time and resource estimates are made as project progresses

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 5, Slide 32

Computer-Based PackageAdvantages

• Regular updates

• Change analysis, tracking, and exception reports

• High level of detail

• Scheduling around resource constraints