Project Management

Operations Management

What is a Project?

A project may be defined as a series of related jobs usually directed toward some major output and requiring a significant period of time to perform.

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Project management is a scientific way of planning, implementing, monitoring and controlling the various aspects of a project such as time, money, materials, manpower and other resources.

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Elements

Project management comprises various elements such as:

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1. Identification of the project.
2. Technical and financial appraisal of the project.
3. Economic or socio-economic appraisal of the project when necessary.
4. Proper formulation of the project.
5. Plan for implementation of the project.

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Elements

Project management comprises various elements such as:

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6. Actual implementation of the project.
7. Monitoring the implementation to see that the project has not deviated considerably from the predefined targets and budgeted resources and time.
8. Control action / rectification action for the deviations.
9. Evaluation either at the end of the project or few years after completion of the project.

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Elements of feasibility analysis

The first step of project management is project identification and appraisal which is also often called project feasibility analysis. This comprises the following elements:

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1. Generation of Project ideas.
2. Screening of the generated ideas.
3. Detailed evaluation of the screened project ideas.

Elements of feasibility analysis

Organizing the Project Team

Before the project starts, senior management must decide which of three organizational structures will be used to tie the project to the parent firm:

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• Pure project.
• Functional project.
• Matrix project.

Organizing Project Tasks

Network-Planning Models

The two best-known network-planning models were developed in the 1950’s.

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• The Critical Path Method (CPM) was developed for scheduling maintenance shutdowns at chemical processing plants owned by DuPont. CPM is based on the assumptions that project activity times can be estimated accurately and that they do not vary.

Network-Planning Models

• The Program Evaluation and Review Technique (PERT) was developed for the US Navy’s Polaris missile project. This was a massive project involving over 3,000 contractors. Because most of the activities had never been done before, PERT was developed to handle uncertain time estimates.

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Critical Path Method (CPM)

The critical path of activities in a project is the sequence of activities that form the longest chain in terms of their time to complete. If any one of the activities in the critical path is delayed, then the entire project is delayed.

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It is possible and it often happens that there are multiple paths of the same length through the network so there are multiple critical paths.

Critical Path Method (CPM)

Following the basic steps:

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1. Identify each activity to be done in the project and estimate how long it will take to complete each activity. A(1), B(2), C(1), D(1).

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• Determine the required sequence of activities and construct a network reflecting the precedence relationships. An easy way to do this is to first identify the immediate predecessors associated with an activity, that is, the activity that need to be completed immediately before an activity.

Critical Path Method (CPM)

Critical Path Method (CPM)

3. Determine the critical path. Consider each sequence of activities that runs from the beginning to the end of the project.�� Path Time��A – B – D 4 weeks.��A – C – D 3 weeks.��

The critical path is the path where the sum of the activity times is the longest.

Critical Path Method (CPM)

4. Determine the early start/finish and late start/finish schedule. To schedule the project, find when each activity needs to start and when it needs to finish.

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�����The slack time is the time that an activity can be delayed without delaying the entire project: the difference between the late and early start times of an activity.

CPM with Three Activity Time Estimates

If a single estimate of the time required to complete an activity is not reliable, the best procedure is to use three-time estimates.

1. Identify each activity to be done in the project.
2. Determine the sequence of activities and construct a network reflecting the precedence relationships.

CPM with Three Activity Time Estimates

3. The three estimates for an activity time are:

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a = Optimistic time: The minimum reasonable period of time in which the activity can be completed.

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m = Most likely time: The best guess of the time required.

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b = Pessimistic time: The maximum reasonable period of time the activity would take to be completed.

CPM with Three Activity �Time Estimates

4. Calculate the expected time (ET) for each activity.

ET =

a + 4m + b

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CPM with Three Activity Time Estimates

5. Determine the critical path.
6. Calculate the variances (s2) of the activity times.
7. Determine the probability of completing the project on a given date, based on the application of the standard normal distribution.

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• Using the value of Z, find the probability of meeting the project due date.

Time – Cost Models and Project Crashing

Project managers are as much concerned with the cost to complete a project as with the time to complete the project.

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Time – Cost models. Extension of the critical path models that considers the trade off between the time required to complete an activity and the costs.

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This models attempt to develop a minimum – cost schedule for an entire project.

Time – Cost Models and Project Crashing

Minimum – Cost Scheduling (Time – Cost Trade-Off). The basic assumption in minimum-cost scheduling, also known as “crashing” is that there is a relationship between activity completion time and the cost of a project.

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Crashing refers to the compression or shortening of the time to complete the project.

It costs money to expedite an activity; on the other, it costs money to sustain the project.

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Costs associated with the expediting activities are termed activity direct costs and add to the project to the project direct cost (overtime working, hiring more workers).

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The costs associated with sustaining the project are termed project indirect costs. (contractual situations)

Time – Cost Models and Project Crashing

1. Prepare a CPM-type network diagram.
• Normal cost (NC): the lowest expected activity costs.
• Normal time (NT): the time associated with each normal cost.
• Crash time (CT): the shortest possible activity time.
• Crash cost (CC): the cost associated with each crash time.

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• Determine the cost per unit of time (assume days) to expedite each activity.

Time – Cost Models and Project Crashing

3. Compute the critical path.

Time – Cost Models and Project Crashing

4. Shorten the critical path at the least cost.��������The easiest way to proceed is to start with the normal schedule, find the critical path, and reduce the path time by one day using the lowest-cost activity.

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Time – Cost Models and Project Crashing

5. Plot project direct, indirect, and total-cost curves and find the minimum-cost schedule.��������Summing the values for direct and indirect costs for each day yields the project total cost curve.