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Project Management

Inventory Management – In-class ExampleInventory Management – In-class Example

Number 2 pencils at the campus book-store are sold at a fairly steady rate of 60 per week. It cost the bookstore $12 to initiate an order to its supplier and holding costs are $0.005 per pencil per year.

Determine The optimal number of pencils for the bookstore to purchase to minimize

total annual inventory cost, Number of orders per year, The length of each order cycle, Annual holding cost, Annual ordering cost, and Total annual inventory cost.

If the order lead time is 4 months, determine the reorder point. Illustrate the inventory profile graphically.

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Project Management

Lecture5

Project ManagementChapter 17

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Project Management

Project ManagementProject Management

How is it different? Limited time frame Narrow focus, specific objectives Less bureaucratic

Why is it used? Special needs Pressures for new or improves products or

services

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Project Management

Project ManagementProject Management

What are the Key Metrics Time Cost Performance objectives

What are the Key Success Factors? Top-down commitment Having a capable project manager Having time to plan Careful tracking and control Good communications

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Project Management

Project ManagementProject Management

What are the Major Administrative Issues? Executive responsibilities

Project selection Project manager selection Organizational structure

Organizational alternatives Manage within functional unit Assign a coordinator Use a matrix organization with a project leader

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Project Management

Project ManagementProject Management

What are the tools? Work breakdown structure Network diagram Gantt charts Risk management

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Project Management

Planning and SchedulingPlanning and Scheduling

MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Locate new facilities

Interview staff

Hire and train staff

Select and order furniture

Remodel and install phones

Move in/startup

Gantt Chart

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Project Management

Deciding which projects to implement

Selecting a project manager

Selecting a project team

Planning and designing the project

Managing and controlling project resources

Deciding if and when a project should be terminated

Key DecisionsKey Decisions

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Project Management

Project ManagerProject Manager

Responsible for:

Work QualityHuman Resources TimeCommunications Costs

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Project Management

Temptation to understate costs

Withhold information

Misleading status reports

Falsifying records

Compromising workers’ safety

Approving substandard work

Ethical IssuesEthical Issues

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Project Management

Project Life CycleProject Life Cycle

Concept

FeasibilityFeasibility

PlanningPlanning

ExecutionExecution

TerminationTermination

Man

agem

ent

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Project Management

Work Breakdown StructureWork Breakdown Structure

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Project Management

PERT and CPMPERT and CPM

PERT: Program Evaluation and Review Technique

CPM: Critical Path Method

Graphically displays project activities Estimates how long the project will take Indicates most critical activities Show where delays will not affect project

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Project Management

The Network DiagramThe Network Diagram

Network (precedence) diagram

Activity-on-arrow (AOA)

Activity-on-node (AON)

Activities

consume resources and/or time

Events

points in time

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Project Management

Project Network – Activity on ArrowProject Network – Activity on Arrow

1

2

3

4

5 6

Locatefacilities

Orderfurniture

Furnituresetup

InterviewHire andtrain

Remodel

Move in

Figure 17.4

AOA

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Project Management

Project Network – Activity on NodeProject Network – Activity on Node

1

2

3

5

6

Locatefacilities

Orderfurniture

Furnituresetup

Interview

RemodelMove in

4

Hire andtrain

7S

Figure 17.4

AON

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Project Management

The Network Diagram (cont’d)The Network Diagram (cont’d)

Path Sequence of activities that leads from the starting

node to the finishing node AOA path: 1-2-4-5-6 AON path: S-1-2-6-7

Critical path The longest path; determines expected project

duration Critical activities

Activities on the critical path Slack

Allowable slippage for path; the difference the length of path and the length of critical path

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Project Management

Network ConventionsNetwork Conventions

a

b

c ab

c

a

b

c

d

a

b

c

Dummyactivity

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Project Management

Time EstimatesTime Estimates

Deterministic

Time estimates that are fairly certain

Probabilistic

Estimates of times that allow for variation

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Project Management

Example 1Example 1

1

2

3

4

5 6

8 weeks

6 weeks

3 weeks

4 weeks9 weeks

11 weeks

1 week

Locate

facilities

Order

furniture Fu

rnitu

re

setup

InterviewHire

and train

Remodel Move in

DeterministicDeterministictime estimatestime estimates

Figure 17.5

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Project Management

Example 1 SolutionExample 1 Solution

P a t h L e n g t h( w e e k s )

S l a c k

1 - 2 - 3 - 4 - 5 - 61 - 2 - 5 - 61 - 3 - 5 - 6

1 82 01 4

206

Critical PathCritical Path

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Project Management

Network activities ES: early start EF: early finish LS: late start LF: late finish

Used to determine Expected project duration Slack time Critical path

Computing AlgorithmComputing Algorithm

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Project Management

Advantages of PERTAdvantages of PERT

Forces managers to organize

Provides graphic display of activities

Identifies

Critical activities

Slack activities1

2

3

4

5 6

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Project Management

Limitations of PERTLimitations of PERT

Important activities may be omitted

Precedence relationships may not be correct

Estimates may include a fudge factor

May focus solelyon critical path 1

2

3

4

5 6

142 weeks