CHAPTER 17 Operations M

CHAPTER 17 OM 1
PROJECT MANAGEMENT
- Project management is a team based approach for managing projects.
How is it different from general operations management?
- Limited time frame

- Narrow focus, specific objectives
- Less bureaucratic
Why is it used?
1. Special needs that don’t lend themselves to functional management

2. Pressures for new or improved products or services, cost reduction.
What are the key metrics?
1. Time
2. Cost
3. Performance objectives
What are the key success factors?
1. Top-down commitment
2. A respected and capable project manager
3. Enough time to plan
4. Careful tracking and control
5. Good communications
What are the major administrative issues?
1. Executive responsibilities.
a. Project selection
b. Selection of project manager
c. Organizational structure
2. Organizational alternatives
a. Manage within functional unit
b. Assign a coordinator
c. Use a matrix organization with a project leader
What are the main tools?

1. Work breakdown structure. An initial planning tool that is needed to develop a list of
activities, activity sequences, and a realistic budget
2. Network diagram. A “big picture” visual aid that is used to estimate project duration,
identify activities that are critical for timely project completion, identify areas where
slack time exists, and develop activity schedules
3. Gantt charts. A visual aid used to plan and monitor individual activities
4. Risk management. Analyses of potential failures or problems, assessment of their
likelihood and consequences, and contingency plans.
Key Decisions in Project Management
- Deciding which projects to implement

- Selecting the project manager
- Selecting the project team
- Planning and designing the project
- Managing and controlling project resources
- Deciding if and when the project should be terminated
The Project Manager is responsible for effectively managing each of the following:
1. The work
2. The human resource
3. Communications
4. Quality
5. Time
6. Costs
Project Champion- a person who promotes and supports a project
The Project Life Cycle
1. Definition
2. Planning
3. Execution
4. Termination
Work breakdown structure (WBS) – A hierarchical listing of what must be done during a project.
Program evaluation and review technique (PERT) Critical path method (CPM), for planning and
coordinating large projects.
By using PERT and CPM, managers are able to obtain.
1. A graphical display of project activities

2. An estimate of how long the project will take
3. An indication of which activities are the most critical to timely project completion
4. An indication of how long any activity can be delayed without delaying the project.
Network diagram – diagram of project activities that shows sequential relationships by the use
of arrows and nodes.
Activity-on-Arrow (AOA) – network diagram convention in which arrows designate activities.
Activity-on-Node (AON) - network diagram convention in which nodes designate activities
Activities – project steps that consumes resources and /or time
Events – the starting and finishing activities designated by nodes the AOA convention.
Path – a sequence of activities that leads from the starting node to the finishing node.
Critical path – the longest path: determines expected project duration
Critical activities – activities on the critical path
Slack – allowable slippage for a path; the difference between the length of a path and the length
of the critical path.
Deterministic – time estimates that are fairly certain
Probabilistic – estimates of times that allow for variation
The Probabilistic approach involves three time estimates for each activity instead of one:
1. Optimistic time
2. Pessimistic time
3. Most likely time
A beta distribution is used to describe probabilistic tine estimates. Beta distribution used to
describe inherent variability in activity time estimates.
In order to make a rational decision on which activities, if any to crash and on the extent of
crashing desirable, a manager needs certain information:
1. Regular time and crash time estimates for each activity

2. Regular cost and crash cost estimates for each activity
3. A list of activities that are on the critical path
General Procedure of Crashing

1. Crash the project one period at a time
2. Crash the least expensive activity that is on the critical path
3. When there are multiple critical paths find the sum of crashing the least expensive
activity on each critical path. If two or more critical paths share common activities
compare the least expensive cost of crashing a common activity shared by critical paths
will the sum of the separate critical paths.
Crash – shortening activity duration
Advantages of Using PERT and Potential Sources of Error
1. Use of these techniques forces manager to organize and quantify available information
and to recognize where additional information is needed.
2. The techniques provide a graphic display of the project and its major activities
3. They identify (a) activities that should be closely watched because of the potential for
delaying the project and (b) other activities that have slack time and so can be delayed
without affecting project completion time. This raises the possibility of recollecting
resources to shorten the project.
Virtual project team – some or all the team members are geographically separated.
Advantages of Using a Project Management Software Package
- It imposes a methodology and a common project management terminology

- It provides a logical planning structure
- It can enhance communication among team members
- It can flag the occurrence of constraint violations
- It automatically formats reports
- It can generate multiple levels of summary reports and detailed reports
- It enables “what-if” scenarios
- It can generate various chart types, including Gantt Charts.

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CHAPTER 17 OM 1

- Project management is a team based approach for managing projects.

How is it different from general operations management?

- Limited time frame

1. Special needs that don’t lend themselves to functional management

What are the key metrics?

What are the key success factors?

What are the major administrative issues?

What are the main tools?

Key Decisions in Project Management

- Deciding which projects to implement

Project Champion- a person who promotes and supports a project

The Project Life Cycle

By using PERT and CPM, managers are able to obtain.

1. A graphical display of project activities

Activity-on-Arrow (AOA) – network diagram convention in which arrows designate activities.

Activity-on-Node (AON) - network diagram convention in which nodes designate activities

Activities – project steps that consumes resources and /or time

Critical path – the longest path: determines expected project duration

Critical activities – activities on the critical path

Deterministic – time estimates that are fairly certain

Probabilistic – estimates of times that allow for variation

1. Regular time and crash time estimates for each activity

General Procedure of Crashing

Crash – shortening activity duration

Advantages of Using PERT and Potential Sources of Error

Advantages of Using a Project Management Software Package

- It imposes a methodology and a common project management terminology

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