Project Management. Chapter 2 DISCUSSION QUESTIONS

Transcription

1 hapter Project Management ISUSSION QUSTIONS 1. Software is an essential element for successful management of complex projects. It can provide information on completion performance of critical activities, highlight activities that need additional resources, and suggest the project duration that will minimize costs. However, whether projects are large or small, the people who manage them or perform the activities will ultimately determine the outcome of the project. The project manager must have the ability to coalesce a diverse group of people into an effective team. The organization of the firm must also be conducive to cross-functional inputs.. Slack in a project is determined by calculating the early start time (S) and the latest start time (LS) for each activity. The S time for an activity is found by moving forward through the project network from the activity along the longest time path to that activity. Using the project s targeted completion date, the LS time is found by moving backward through the project network from the node along the longest path to that activity. The difference LS S determines the slack for that activity. Slack can also be calculated by taking the difference between the latest finish time (L) and the earliest finish time () for an activity. Managers need to know the slack for each activity because slack indicates how much the schedule for that activity can slip before the entire project is delayed. ctivities with little or no slack need to be closely monitored. In addition, managers can move resources from activities enjoying sizeable slack to activities that have no slack or are falling behind schedule. Risk is a measure of the probability and consequence of not reaching a project goal. There are four major sources of risk in a project: (1) Strategic fit, which reflects the synergy of the project to the firm s operations strategy. lack of fit may cause myriad problems of resorce allocation and managerial motivation. () If the project involves the introduction of a new service or product, competitor reactions, technological developments after the project has been initiated, and legal challenges brought on by unforeseen design consequences can all have a role in defining the success of the project. () The capability of the project team to tackle the specifications of the project play a major role in the success of the project. () There may be an operations risk introduced by poor information communication, poor design of the project network, or bad estimates for activity times. -1 opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall. 1

2 - Part I Using Operations to ompete PROLMS 1. a. ON network diagram 1 H J I b. The critical path is H J with a completion time of days. c. arliest Latest arliest Latest On ritical ctivity uration Slack Path? Yes 6 1 No Yes No No 1 1 Yes No H 1 1 Yes I No J Yes. a. ON diagram opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

3 Project Management HPTR - b. The critical path is with a completion time of days. arliest Latest arliest Latest On ritical ctivity uration Slack Path? Yes No Yes Yes Yes 19 1 No Yes c. ctivities and are the only ones to have slack.. illing process. a. ON diagram 1 6 H 11 1 b. The critical path is ---H with a completion time of weeks. The computation of slack is provided in the following output from Project Management Solver of OM xplorer. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

4 - Part I Using Operations to ompete. a. ON diagram I J H 6 K b. The critical path is I with a completion time of 1 days. arliest Latest arliest Latest On ritical ctivity uration Slack Path? Yes No No No 1 1 Yes 9 No Yes H No I Yes J No K No. a. The ON network is: S I LS UR L opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

5 Project Management HPTR - b. ctivity slacks for the project: ritical ctivity arliest Latest arliest Latest Slack Path? Yes Yes Yes No 1 16 No Yes 1 1 Yes ritical path is, and the project completion date is week restview ank. a. The ON diagram is: 6 9 H 11 b. The critical path is ---H with a completion time of 9 weeks. c. The computation of slack is provided in the following output from Project Management Solver of OM xplorer. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

6 -6 Part I Using Operations to ompete The slack for activity = 1 = weeks. The slack for activity = 1 = weeks.. Web Ventures Inc. ctivity Statistics ctivity Optimistic Most Likely Pessimistic xpected Time Variance (a) (m) (b) (t e ) ( ) a. b. t days e t days e t days e t days e t days e a. The expected activity times (in days) are: ctivity Optimistic Most Likely Pessimistic t e Path Total xpected Time + 6 = = = 1. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

7 Project Management HPTR - b. The critical path is because it has the longest time duration. The expected completion time is 19 days. T z T P Where T = 1 days, T = 19 days, and the sum of the variances for critical path is ( ) = z ssuming the normal distribution applies (which is questionable for a sample of three activities), we use the table for the normal probability distribution. iven z = 1., the probability that the project can be completed in 1 days is.99, or about 9%. c. ecause the normal distribution is symmetrical, the probability the project can be completed in 1 days is (1. 99) =. 1, or about 1%. 9. Solved Problem. T z T p Where T = weeks, T = ( ) = 19 weeks, and the sum of the variances for critical path is ( ) =.16. ssuming the normal distribution applies, we use the table for the normal probability distribution. iven z =.9, the probability for activities taking longer than weeks is (1.69), or 1.1%. 1. a. The ON diagram is: S I LS UR L 1 1 opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

8 - Part I Using Operations to ompete b. ritical path is. xpected duration of the project is 1 weeks. c. ctivity slacks for the project are: ritical ctivity arliest Latest arliest Latest Slack Path? 9 No Yes 9 11 No Yes No 1 1 Yes opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

9 Project Management HPTR luebird University. alculation of activity statistics (in days): Project time Project standard deviation.99 Project variance.69 ctivity Total ctivity Slack xpected Time Standard deviation Variance arly arly Late Late H I J The ON diagram is: J. 1 I 11. H The critical path is I, and the expected completion time is.1 days. T = days, T =.1 days, and the sum of the variances for the critical activities is: ( ) =.6. T T z P ssuming the normal distribution applies, we use the table for the normal probability distribution. iven z = 1., the probability that activities I can be completed in days or less is.9. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

10 -1 Part I Using Operations to ompete 1. ON iagram for the environmental project: S LS I UR L H I Resulting Time Project rash ritical Reduction uration rash Trial ctivity Path (weeks) (weeks) ost H 1 I I 1, H 1 1 $ I, H 1 16 $ H I, H H 1 1 $6 H I I Total crash costs = $1 To use OM xplorer for this problem, you need to modify the input data a little. The problem already gives the cost to crash per week for each activity. Since OM xplorer assumes it must calculate these values, multiply the number of weeks the activity can be crashed by the cost per week given in the problem opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

11 Project Management HPTR -11 statement, e.g., for activity, $() = $. The input sheet and the resulting crash schedule should look like the exhibits below. Indirect cost $ 1,6 per week Penalty cost $ 1, per week after week 1 Solver - rashing nter data in yellow shaded areas. ctivity Normal Time Normal ost rash Time rash ost Precedence 1 Precedence Precedence Precedence a 6 b 1 9 c 6 a d 6 a e 1 1 b f 1 1 c d g 1 d e RSH SHUL (Reduction in Time Periods) Period crash cost umulative Indirect irect Penalty Total Time crash cost costs costs costs costs a b c d e f g h i 1,, 6, 1, 6,, ,6, 1, ,,,6 9, dvanced Tech a. The ON diagram, with all task durations at Normal Time, for the project is: 6 6 H The critical path is ----H and the project duration is days. b. The computation of minimum-cost schedule is provided in the following output from POM for Windows software. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

12 -1 Part I Using Operations to ompete The minimum-cost schedule is found at a project duration of 1 days and total project cost of $1, c. The activities crashed to arrive at the minimum-cost schedule is provided in the following output from POM for Windows software. H The critical path is ----H, and the project duration is 1 days. 1. illing process. a. The critical path at the start is -- at a duration of 1 weeks. We proceed as follows: (1) rash ctivity to its maximum reduction because it is the cheapest activity on the critical path to crash per week and costs less than $,, the sum of the indirect and penalty costs. The savings is $,6. The critical path is still -- at a length of 16 weeks. () Reduce ctivity by weeks for an additional savings of $,. The critical path is still -- at a duration of 1 weeks. No further reductions will lower total costs because the cost to crash the other activities (that is, ctivity ) exceeds the potential reduction in indirect costs. Therefore, the minimum-cost schedule is 1 weeks. b. The normal direct cost is $1,, the normal indirect costs are $,, the penalty costs are $,, and the total for the normal schedule is $6,. The cost for the schedule in part a is $1, + $, (crash costs) + $, (indirect costs) + $1 (penalty) = $61,. The total savings is $6,. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

13 Project Management HPTR xcello orporation.. a. The shortest project duration time would be weeks (path --), using the crash times. b. ON diagram with all task durations at Normal Time 1 The critical path is --- with a project completion time of 11 weeks. The computation of minimum-cost schedule is provided in the following output from POM for Windows software. Since the normal project time is 11 weeks, the total normal direct cost is $6,. There would also be indirect costs of $16, over the 11-week period. The penalty cost would be $1,. The grand total is $9,. Likewise, the minimum-cost schedule for completing the project in 9 weeks has a total project cost of $199,. c. The crashing required to arrive at the minimum-cost schedule is provided in the following output from POM for Windows software. The minimum-cost schedule would take weeks. This can be found in the following way: (1) the starting critical path is --- at 11 weeks. Since ctivity is the cheapest to crash per week, crash it one week for an additional cost of $. The savings is $1, (indirect costs) + $9, (penalty costs) - $, = $1,. The project duration is now 1 weeks. () Since ctivity cannot be crashed further, the next cheapest activity to crash that is on the critical path is ctivity. rash for its maximum of two weeks at an opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

14 -1 Part I Using Operations to ompete additional cost of $1,. The savings would be $, (indirect costs) + $1, (penalty costs) - $1, = $,. The critical path is now weeks in duration. Since the penalty costs are zero for further reductions, there are no other options to reduce the project time that are less costly than the indirect costs per week. Therefore, we stop. 16. Pet Paradise a. alculation of the activity statistics is provided in the following output from POM for Windows software: The ON diagram for the hiring project is: H The critical path is --H with an expected project completion time of 1 weeks. T T 1 1 b. z Using the normal distribution table, the probability of project completion within 1 weeks is (1-.961=.9) or a.6% chance. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

15 Project Management HPTR n ON diagram using the lternative 1 (or normal ) times follows H I The critical path is, and the project duration is 9 days. irect cost and time data: Maximum rash ctivity rash ost/ay Time (days) $ H. 1 I 9. ost analysis for the project: Resulting Time Project rash ritical Reduction uration rash Trial ctivity Path (weeks) (weeks) ost 9 1 H 1 6, H 1 H The total cost for this project is: $1, + $ + $ + $ = $1,1. The activity times with crashing are: : 1 : 1 : 1 : : 1 : : 6 H: 1 I: opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

16 -16 Part I Using Operations to ompete 1. Sculptures International a. The ON diagram for this project is: b. The critical path is, and the project duration is 1 days. c. ctivity ctivity Slack 1 = = 19. Reliable arage a. The ON diagram is: H opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

17 Project Management HPTR -1 b. ritical Path is H, and the duration is days. c. ctivity ctivity Slack 1 = 19 = H. a. The ON diagram is shown below I 6 K H 1 J 9 b. The critical path is H J K, and the expected project duration is days. 1. ood Public Relations. a. alculation of the activity statistics: Project time 6. Project standard deviation 1.6 Project variance. ctivity Total ctivity Slack xpected Time Standard deviation Variance arly arly Late Late H I J K opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

18 -1 Part I Using Operations to ompete The ON diagram for the advertising campaign is shown below. 6. I H J K 6. 1 The critical path is H J, the expected project duration is 6. days, and the sum of the variances of the critical path activities is ( ) =. T T b. z P The probability that the project will take more than days is 1. or.1 c. The path H J has a duration of. weeks with variance of.6. T T. Therefore, z. 1.6 P The probability that the path H J exceeds weeks is 1.99, or.. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

19 Project Management HPTR -19. The ON diagram for the office renovation project is below. 1 STRT 1 H K 1 L INISH 1 I J 1 The calculations of the time statistics are contained in the following table. ctivity Optimistic Most Likely Pessimistic xpected Variance Time STRT H. I. J.11 K L 1.11 INISH a. The critical path is - at 1 days. Standard eviation = SQRT ( ) =.6. z = (1 9)/.6 =.69, which can be rounded to.. rom the normal tables, P(z) =.. Therefore, P(T < 9 days) = 1.. = percent. b. We want to find the project completion time so that the probability of completion is 9 percent. The z value for 9 percent is 1.. onsequently, (T 1)/.6 = 1. T = 1. (.6) + 1 T =., or about days. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

20 - Part I Using Operations to ompete. The ON diagram for the community center project is below. STRT 1 INISH H 6. The crashing data are given in the following table. Normal rash Maximum ctivity Time (days) ost ($) Time (days) ost ($) Reduction $ per ay STRT NON NON NON NON H INISH a. The critical path is - H at days. b. ST 1 ritical path is H at days. rash H for days. You are stopped by path. Savings: ( + ) () = $1. ST There are two critical paths: H and - at 1 days. rash H and each for 1 day. Savings: 1( + ) 1( + ) = $. ST There are two critical paths: H and at 1 days. rash 1 day. You are constrained by a new path, H and. Savings: 1( + ) 1 () = $1. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

21 Project Management HPTR -1 ST There are now four critical paths: H,, H and each at 16 days. The only option is to crash both and ; however the total cost of $1 per day exceeds the potential savings. Therefore, stop. Total ost = 16() + () = $1,1.. a. ON diagram for the fund-raising project 6 H I 1 K L M N O 1 P J ctivity slacks for the project: Solver - Project udgeting Results Project time Project udget $,1 ctivity arly arly Late Late Total ctivity Slack H I J K L M N O P The critical path is K N P, and the expected completion time is days. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

22 - Part I Using Operations to ompete b. Project cost with the earliest start time for each activity: Project time Project udget $,1 Period Total H I J K L M N O P opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

23 Project Management HPTR - Project cost with the latest start times for each activity: Project time Project udget $,1 Period Total H I J K L M N O P opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

24 ost - Part I Using Operations to ompete ost by day is plotted for arly and Late Schedules. OM xplorer Solver - Project udgeting ost by Period Period arly Late start These two plots indicate the patterns of cash flow associated with the two different project schedules. Management can select the schedule that fits better with its financial status. Notice that the latest start dates delay cash flow requirements to the later time periods of the project.. The ON diagram for the software installation project is below. 1 I 9 STRT 9 INISH H opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

25 Project Management HPTR - The crashing data are given in the following table. ctivity Normal Time Normal ost rash Time rash ost Max reduction $ per Week $, $, 1, $, $, 1, 1 $1, $1, 1, $, $, 1, $, $, 1 1, 9 $, 6 $1,, $, $, NON NON H $6, $9, 1, I 9 $, $1,, a. ST 1 The critical path is H at 1 weeks. rash H by 1 week because you are constrained by path I. Savings: 1(,) 1 (1,) = $,. ST There are two critical paths: H and I at weeks. rash for weeks. Savings: (,) (,) = $,. ST There are still two critical paths: H and I at weeks. rash for 1 week. Savings: 1(,) 1(,) = $. ST There are still two critical paths: H and I at 6 weeks. ll options cost more than the potential savings. Therefore, stop. Your target completion week is week 6. b. Total Savings = $, + $, + $ = $,. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

26 -6 Part I Using Operations to ompete 6. The ON diagram for the project is below. STRT 6 INISH dditional data for the project are contained in the following table. ctivity Time (weeks) arly Late Slack STRT INISH 1 1 a. The critical path is. The project will be finished in week 1. b. ctivity is on a path with weeks of slack; however each week mployee spends at ctivity, s time goes down a week while s goes up a week. onsequently, assigning mployee to ctivity for weeks will result in two critical paths: at 1 weeks and - at 1 weeks. ssigning mployee to ctivity for any more time than that will actually increase the project s time from the low of 1 weeks. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

27 Project Management HPTR - S: TH PRT MUSTN *. Synopsis The owner of the Roberts uto Sales and Service ompany is interested in restoring a 196 Shelby Mustang T for advertising a new restoration business she wants to start. The restoration project involves activities and needs to be completed in days so that the car can be displayed in an auto show. The owner wants an assessment of how the restoration business fits with the other businesses the company engages in, a report on the activities that need to be completed and their interrelationships, an assessment of whether the project can be completed on time, and a budget.. Purpose This case provides enough data for the student to develop a PRT/PM network for a project involving activities. With this case, the class can: iscuss how well a new market segment can be satisfied with an existing operation. ain experience in identifying the relationships between activities in a large project. Relate cost to the development of a project.. nalysis 1. The restoration business, although entailing much of the skills and resources needed for the other market segments the company serves, needs to be evaluated carefully before making a commitment. urrently, the company has three car dealerships, two auto parts stores, one body/paint shop, and one auto storage yard. These operations would be useful for the restoration business. However, the nature of the markets served by these operations is not made explicit in the case. Some questions come to mind: a. re the auto parts stores equipped to provide customers with one-of-akind parts? Restoration parts are hard to find and require access and familiarity with different information systems. b. oes the body/paint shop have the ability to do custom, high-quality work, with restoration of rusty parts, or is it a high-volume operation with minimal capability to restore any car to its original condition? c. oes the machine shop have the capability to machine one part at a time to unique specifications if the restoration part cannot be purchased from a supplier? * This case was prepared by r. Sue Perrott Siferd, rizona State University, as a basis for classroom discussion (Updated September, ). opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

28 - Part I Using Operations to ompete d. How useful will the salvage yard be for the restoration business? There must be a broad mix of vintage age autos in the yard in order to support the new business. The competitive priorities for the restoration business most likely will be top quality and customization in a low-volume environment. It would seem that these competitive priorities could conflict with other market segments the company serves.. The project activities and the precedence relationships are given in xhibit TN.1.. PRT/PM diagram is shown in xhibit TN.. The latest finish data are set for days from present, which would be the day before the car must be in the show. The critical path is T V, and the expected project duration is 1 days. The slack of each event along the critical path is days, suggesting no problem in completing the project on time.. project budget is shown in xhibit TN.. The project will meet the goal of staying below $,. cash-flow report is shown in xhibit TN.. It is aggregated by weekly time periods. ctivities,, and are assumed to be paid when the item is received (on its early finish time). We assume that if an activity is scheduled to start during a week, the total cost is prorated for that week and following weeks. If MS Project is used for this analysis, the calendar date the students use for the start of the project may affect the weeks in which certain costs may accrue. lso, MS Project assumes a five-day workweek as a default. rom xhibit TN. it appears that there is a cash flow problem in week because the cash required exceeds $,6. To resolve the problem, use the activity slack that is available and schedule one or more activities to start later than their earliest start times. or example, ctivity, receive carburetor and oil pump, has slack of 16 days (see xhibit TN.). ctivity could be scheduled to start in Week so that it is completed in Week, thereby pushing the payment to Week. Note that Week would now have $, in cash requirements, just below the constraint of $,6.. Recommendations The owner should: 1. arefully evaluate the potential conflicts of competitive priorities for the new restoration business.. Monitor the critical path of T V, although there is slack.. Monitor the budget even though there should be ample room for unexpected contingencies. opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

29 Project Management HPTR -9. Teaching Suggestions This case should be an overnight assignment so that the students have the opportunity to think through the construction of the PRT/PM diagram. This is not a difficult assignment, even though there are activities. If used for discussion in class, it should be discussed after the PRT/PM approach has been addressed in a previous class. lternatively, the case could be used as a written assignment with no debriefing during class. The discussion should begin with the potential conflicts with competitive priorities so that the class understands the strategic implications of the new restoration business. There is not enough information in the case to make a definitive conclusion, so the emphasis should be on the potential for conflicts and the need to do some serious exploration. The discussion can then turn to the network diagram and the conclusions. See xhibits TN. and TN. for suggestions.. oard Plan Unique Tasks for Restoration usiness ompetitive Priorities ind parts no longer made Top Quality Manufacture unique parts ustomization Low volumes ustom body work ustom paint work New information system XHIIT TN.1 Table of Tasks Immediate Task Time Predecessors Order all needed material and parts days None Receive upholstery material days Receive windshield 1 days Receive carburetor and oil pump days Remove chrome from body 1 day None Remove body from frame 1 day et fenders repaired days H Repair the doors, trunk, and hood 6 days I Pull engine from chassis 1 day J Remove rust from frame days I K Have valves reground in engine days I L Replace carburetor and oil pump 1 day, I M et the chrome parts rechromed days N Reinstall engine 1 day K, L O Put doors, hood, and trunk back on frame 1 day H, J P et transmission rebuilt and replace brake days N, O Q Replace windshield 1 day R Put fenders back on 1 day, P S et car painted days Q, R T Reupholster interior of car days, S U Put chrome back on 1 day M, S V Pull car to Studebaker show in Springfield, Missouri days T, U opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

30 - Part I Using Operations to ompete XHIIT TN. PRT/PM Network XHIIT TN. Project udget for The PRT Mustang Task stimated ost $1,1 1, 1, H 1, I J 9 K 1, L M 1 N O P, Q 1 R 1 S 1, T, U 1 V 1, Total ost $1,1 opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.

31 Project Management HPTR -1 XHIIT TN. ased on -day weeks ash low Report for The Pert Mustang Total Order needed material and parts $1 $1 Receive upholstery material for seat covers $,1 $,1 Receive windshield $ $ Receive carburetor and oil pump $1, $1, Remove chrome from body $ $ Remove body from frame $ $ enders repaired by body shop $ $ $1, H Repair doors, trunk, hood $ $ $1, I Pull engine from chassis $ $ J Remove rust from frame $6 $ $9 K Regrind engine valves $ $6 $1, L Replace carburetor and oil pump $ $ M Rechrome the chrome parts $1 $1 N Reinstall engine $ $ O Put doors, hood, and trunk on frame $ $ P Rebuild transmission and replace brakes $, $, Q Replace windshield $1 $1 R Put fenders back on $1 $1 S Paint car $1, $1, T Reupholster interior $1,9 $1,1 $, U Put chrome back on $1 $1 V Pull car to Studebaker show $ $ $1, Total $,1 $,9 $,1 $1, $1 $ $,19 $1,1 $ $1,1 opyright 1 Pearson ducation, Inc. Publishing as Prentice Hall.