Scheduling and Budgeting

Week 6IBS 540

Scheduling

A schedule is the conversion of a project action plan into an operating timetable

It serves as the basis for monitoring and controlling project activity

Taken together with the plan and budget, it is probably the major tool for the management of projects

Scheduling

In a project environment, the scheduling function is more important than it would be in an ongoing operation

Projects lack the continuity of day-to-day operations and often present much more complex problems of coordination

Scheduling

The basic approach of all scheduling techniques is to form a network of activity and event relationships

This network should graphically portray the sequential relations between the tasks in a project

Tasks that must precede or follow other tasks are then clearly identified, in time as well as function

SchedulingSuch networks are a powerful tool for

planning and controlling a project and have the following benefits: It is a consistent framework for planning,

scheduling, monitoring, and controlling the project

It illustrates the interdependence of all tasks, work packages, and work elements

It denotes the times when specific individuals must be available for work on a given task

SchedulingNetwork benefits (cont.):

It aids in ensuring that the proper communications take place between departments and functions

It determines an expected project completion date

It identifies so-called critical activities that, if delayed, will delay the project completion time

It identifies activities with slack that can be delayed for specific periods without penalty

SchedulingNetwork benefits (cont.):

It determines the dates on which tasks may be started - or must be started if the project is to stay on schedule

It illustrates which tasks must be coordinated to avoid resource timing conflicts

It illustrates which tasks may run, or must be run, in parallel to achieve the predetermined project completion date

It relieves some interpersonal conflict by clearly showing task dependencies

Network Techniques: PERT and CPM

With the exception of Gantt charts, the most common approach to scheduling is the use of network techniques such as CPM a.k.a PERT

The critical path method (CPM) was invented by project managers in the early 1950's.

The US Navy adapted and improved it to manage the Polaris missile project in the late 1950's. Naming the technique PERT (Program Evaluation and Review Technique) the Defense, Aerospace, and other industries adopted the tool as the major project tool to this day.

Network Techniques: PERT and CPM

PERT lists the specific activities that make up a project, their duration and the activities that must be completed before a specific activity can start.

This PERT chart shows the relationship between each activity, no activity can begin before its precedent activities are completed.The precedents are the activities that the arrows come from.The time (in days) for each activity is noted in its box (for example Patient Teaching has an expected time of T=2 days).These relationships create pathways through the process. Summing the times along each pathway gives the pathways length or duration. The longest pathway is the critical pathway, the critical pathway is the longest pathway in the process. The process cannot end before the critical pathway ends.In the diagram the critical pathway consists of the bold faced boxes.

Activity

Terminology

Activity - A specific task or set of tasks that are required by the project, use up resources, and take time to complete

Event - The result of completing one or more activities.

Network - The combination of all activities and events define the project and the activity precedence relationships

Terminology

Path - The series of connected activities (or intermediate events) between any two events in a network

What is Critical Path (CPM)?  

Critical Path - the path of longest duration as determined on a project network diagram. The critical path determines the total duration of the project. If a task on the critical path is delayed, the final completion of the project will likely be delayed.

The critical path is "critical" because tasks that follow a critical task cannot be started until all of the previous tasks on the critical path are completed.. The critical tasks will have starting and finishing times that are fixed relative to the start of the project.

Tasks not on the critical path will usually have some flexibility relative to when they can start and finish. This flexibility is called "float", or sometimes "slack". Float is the difference between the time available for performing a task and time required to complete a task.

TerminologyAn activity can be in any of these

conditions: It may have a successor(s) but no

predecessor(s) - starts a network It may have a predecessor(s) but no

successor(s) - ends a network It may have both predecessor(s) and

successor(s) - in the middle of a network

Scheduling

Scheduling

Scheduling

Drawing Networks

Scheduling

Scheduling

Student Exercise: Tasks for Preparing Dinner

A, Wash and cut salad vegetables (15 minutes)

B, Toss the salad (2 minutes)

C, Set the table (8 minutes)

D, Start the rice cooking (2 minutes)

E, Cook rice (25 minutes)

F, Place the rice in a serving dish (1 minute)

G, Mix casserole ingredients (10 minutes)

H, Bake the casserole (25 minutes)

I, Bring the food to the table (2 minutes)

J, Call the family for dinner (1 minute)

Gantt Charts

Shows timing of tasks Shows sequence of tasks The Gantt chart shows planned and actual

progress for a number of tasks displayed against a horizontal time scale

It can be helpful in expediting, sequencing, and reallocating resources among tasks

GANTT Example

0 1 2 3 4 5 6 7 8 9 12 14 16A - Prelim Market Analysis

B - Dev of Prelim Product Design

C - Prelim Manuf Study

D - Evaluate & Select Best Product Design

E - Dev Detailed Marketing Plans

F - Design Manuf process

G - Dev Detailed Product Design

H - Build and test prototype

I - Finalize product Design

J - Order Components

K - Order Product Equipment

L - Install Production Equipment

0 1 2 3 4 5 6 7 8 9 12 14 16

15

15

Time in Months

10

10

11

11

13

13

Gantt Charts

There are several advantages to the use of Gantt charts: Even though they may contain a great

deal of information, they are easily understood

While they may require frequent updating, they are easy to maintain

Gantt charts provide a clear picture of the current state of a project

They are easy to construct

Summary

Scheduling is particularly important to projects because of the complex coordination problems

The network approach to scheduling offers a number of specific advantages of special value for projects

Critical project tasks typically constitute fewer than 10 percent of all the project tasks

Summary

Networks are usually constructed from left to right, indicating activity precedence and event times as the network is constructed

Gantt charts are closely related to network diagrams, but are more easily understood and provide a clearer picture of the current state of the project

Budgeting and Cost Estimation

The budget serves as a standard for comparison

It is a baseline from which to measure the difference between the actual and planned use of resources

Budgeting procedures must associate resource use with the achievement of organizational goals or the planning/control process becomes useless

The budget is simply the project plan in another form

Estimating Project Budgets

In order to develop a budget, we must: Forecast what resources the project will require Determine the required quantity of each Decide when they will be needed Understand how much they will cost - including the

effects of potential price inflation

There are two fundamentally different strategies for data gathering: Top-down Bottom-up

Top-Down Budgeting

This strategy is based on collecting the judgment and experiences of top and middle managers

These cost estimates are then given to lower level managers, who are expected to continue the breakdown into budget estimates

This process continues to the lowest level

Top-Down BudgetingAdvantages:

Aggregate budgets can often be developed quite accurately

Budgets are stable as a percent of total allocation The statistical distribution is also stable, making for

high predictability Small yet costly tasks do not need to be individually

identified The experience and judgment of the executive

accounts for small but important tasks to be factored into the overall estimate

Bottom-Up Budgeting

In this method, elemental tasks, their schedules, and their individual budgets are constructed following the WBS or project action plan

The people doing the work are consulted regarding times and budgets for the tasks to ensure the best level of accuracy

Initially, estimates are made in terms of resources, such as labor hours and materials

Bottom-up budgets should be and usually are, more accurate in the detailed tasks, but it is critical that all elements be included

Bottom-Up BudgetingAdvantages:

Individuals closer to the work are apt to have a more accurate idea of resource requirements

The direct involvement of low-level managers in budget preparation increases the likelihood that they will accept the result with a minimum of aversion

Involvement is a good managerial training technique, giving junior managers valuable experience

BudgetingTop-down budgeting is very commonTrue bottom-up budgets are rare

Senior managers see the bottom-up process as risky

They tend not to be particularly trusting of ambitious subordinates who they fear may overstate resource requirements

They are reluctant to hand over control to subordinates whose experience and motives are questionable

Work Element Costing

The actual process of building a budget - either top-down or bottom-up - tends to be a straightforward but tedious process

Each work element in the action plan or WBS is evaluated for its resource requirements, and then the cost

Direct costs for resources and machinery are charged directly to the project. Labor is usually subject to overhead charges. Material resources and machinery may or may not be subject to overhead.

Budgeting Process

Usually the initial step toward reducing the difference between the superior’s and the subordinate’s estimates is made by the superior

The superior agrees to be “educated” by the subordinate in the realities of the job

This is a time consuming process, especially when the project manager is negotiating with several subordinates

Project Budget by Task and Month

Task I J Estimate 1 2 3 4 5 6 7 8

Monthly Budget (£)

A 1 2 7000 5600 1400

B 2 3 9000 3857 5143

C 2 4 10000 3750 5000 1250

D 2 5 6000 3600 2400

E 3 7 12000 4800 4800 2400

F 4 7 3000 3000

G 5 6 9000 2571 5143 1286

H 6 7 5000 3750 1250

I 7 8 8000 2667 5333

J 8 9 6000 6000

75000 5600 12607 15114 14192 9836 6317 5333 6000

Improving the Process of Cost Estimation

There are two fundamentally different ways to manage the risks associated with the chance events that occur on every project: The most common is to make an

allowance for contingencies - usually 5 or 10 percent

Learning Curves

Studies have shown that human performance usually improves when a task is repeated

In general, performance improves by a fixed percent each time production doubles

More specifically, each time the output doubles, the worker hours per unit decrease to a fixed percentage of their previous value

That percentage is called the learning rate The project manager should take the learning curve

into account for any task where labor is significant

Budgeting and Cost Estimation

Other FactorsAnywhere from about three-fifths to five-sixths

of projects fail to meet their time, cost, and/or specification objectives

There are several common causes:Arbitrary and impossible goalsScope creepWildly optimistic estimates in order to influence

the project selection processChanges in resource pricesFailure to include an allowance for waste and

spoilageBad luck