Sources

•www.mindtools.com•Production and Operations Management (Chapter 12)

by Chase & Aquilans

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Outline� Introduction to Project Management

� Estimating Time Accurately

� Risk Impact /Probability Chart

PERT Analysis� PERT Analysis

� Critical Path Analysis

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What is project management

Definition: The planning, directing and controlling of resources to meet the technical cost and time constraints of a project.

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A project is a unique venture with a beginning and an end conducted by people to meet established goals within parameters of cost, schedule and quality

Estimating time accurately� Set project deadlines

� Determine the pricing and profitability of a project

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Steps:•Elliminate all unknowns (drill-down)•Guess how long each task will take•Don’t forget a safety factor – 2X

Managing uncertainties� Projects are often executed in uncertain and risky

environments.

Steps:

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Steps:•Be conscious of all risks•Prioritize•Employ risk management strategies•Risk impact/probability chart

Risk impact/probability chartBased on the principle that a risk has two primary dimensions:

Probability - A risk is an event that "may" occur. The probability may range between 0% and 100%

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Impact - A risk always has a negative impact. The size of an impact varies by•Cost•Health•Human life•Some other critical factor

Risk impact/probability chartThe extreme corners of the chart gives us:•Low impact/Low probability risk

•Ignore

•Low impact/High probability risk•Eliminate likelihood of occurrence or cope

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•Eliminate likelihood of occurrence or cope

•High impact/Low probability risk•Try reducing impact•Have a contingency plan

•High impact/High probability risk•These are your topmost priority so spend more time and resources to reduce their impact and certaintySource: www.mindtools.com

Project Evaluation and Review Technique

(PERT) analysis

PERT biases time estimates away from the unrealistically short time-scales normally assumed.

Estimated time is calculated as followed:

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shortest time + 4 x likely time + longest time-----------------------------------------------------------

6

To use this technique…•List all activities required to complete the project in a WBS•Estimate the time and cost each activity will take to complete•Outline the dependencies between activities

Activity PredecessorTime estimates Expected

timeOpt. (O) Normal (M) Pess. (P)

A — 2 4 6 _

B — 3 5 9 5.33

Project Evaluation and Review Technique

(PERT) analysis

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B — 3 5 9 5.33

C A 4 5 7 5.17

D A 4 6 10 6.33

E B, C 4 5 7 5.17

F D 3 4 8 _

G E 3 5 8 5.17

Used more in projects where time, rather than cost, is the major factor.

Critical Path Analysis (CPA)CPM calculates the longest path of planned activities to the end of a project, and the earliest and latest that each activity can start and finish without making the project longer.

Two main objectives:

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Two main objectives:•Critical path(i.e., activities with the longest path)•Sub-critical paths (i.e., activities that can be delayed without making the project longer)

The critical path is the sequence of project network activities which add up to the longest overall duration.

CPA continuedTo use this technique…•List all activities required to complete the project in a WBS•Estimate the time and cost each activity will take to complete•Outline the dependencies between activities•Draw your project network diagram

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Project network diagram

H4

B3

D5

0, 4

4, 7

7, 12

7, 8

12, 16

16, 22

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A4

E1

C2

F3

I6

G4

4, 6

6, 9

9, 13

Focus on the critical path

H4

B3

D5

0, 4

4, 7

7, 12

7, 8

12, 16

16, 22

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A4

E1

C2

F3

I6

G4

4, 6

6, 9

9, 13

Time cost trade-offs

Direct cost: Costs directly associated with project activities. Example, salaries.Increases as project time shortens

Indirect cost: Overhead costs not directly associated with a specific project. Example, office space. Decreases as project time shortens

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Crash cost: This refers to acceleration of a project in order to complete the project sooner

Cost/unit time for crashing = Crash Cost – Normal Cost Normal Time – Crash Time

CPA continued

Determining the total crashing cost

Activity A = 2 ($500) = $1,000

Activity D = 1 ($2000) = $2,000

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Activity D = 1 ($2000) = $2,000

Total Crashing Cost = $3,000

Summary

� Introduction to Project Management

� Estimating Time Accurately

� Risk Impact /Probability Chart

PERT Analysis

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� PERT Analysis

� Critical Path Analysis

Thank you

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