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Operations Management 3QC3 Jan 22, 2014
Chapter 3: Project Management
The Importance of Project Management
The management of projects involves three phases:
1. Planning – This phase includes goal setting, defining the project, and team organization
2. Scheduling – This phase relates people, money, and supplies to specific activities and
relates activities to each other
3. Controlling – Here, the firm monitors resources, costs, quality, and budgets. It also
revises or changes plans and shifts resources to meet time and cost demands
Projects can be defined as a series of related tasks directed toward a major output.
Project organization: An organization formed to ensure that programs (projects) receive the
proper management and attention. It is a temporary organization structure.
The project organization works best when:
•Work can be defined with a specific goal and deadline
•The job is unique or somewhat unfamiliar to the existing organization
•The work contains complex interrelated tasks requiring specialized skills
•The project is temporary but critical to the organization
•The project cuts across organizational lines
The Project Manager
The manager heading a project coordinates activities with other departments and reports directly
to top management. Project managers are responsible for making sure that 1) all necessary
activities are finished in proper sequence and on time, 2) the project comes in within budget, 3)
the project meets its quality goals, 4) the people assigned to the project receive the motivation,
direction, and information needed to do their jobs.
They often deal with offers of gifts from contractors, pressure to alter status reports to mask the
reality of delays, false reports for charges of time and expenses, and pressures to compromise
quality to meet bonus or penalty schedules.
Work Breakdown Structure
Work breakdown structure (WBS): A hierarchical description of a project into more and more
Project scheduling involves sequencing and allotting time to all project activities.
Gantt charts: Planning charts used to schedule resources and allocate time. They are low-cost
means of helping managers make sure that:
1. Activities are planned
2. Order of performance is documented
3. Activity time estimates are recorded
4. Overall project time is developed
However, Gantt charts do not adequately illustrate interrelationships between activities and
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PERT and CPM, do have the ability to consider precedence relationships and interdependency of
Project scheduling serves the following purposes:
•It shows the relationship of each activity to others and to the whole project
•It identifies the precedence relationships among activities
•It encourages the setting of realistic time and cost estimates for each activity
•It helps make better use of people, money, and material resources by identifying critical
bottlenecks in the project
Project Management Techniques: PERT and CPM
Program evaluation and review technique (PERT): A project management technique that
employs three time estimates for each activity
Critical path method (CPM): A project management technique that uses only one time factor
The Framework of PERT and CPM
Critical path: The computed longest time path(s) through a network.
The activities on the critical path represent tasks that will delay the entire project if they are not
completed on time.
The objectives of PERT and CPM are the same.
CPM makes the assumption that activity times are known with certainty and hence requires only
one time factor for each activity.
Network Diagrams and Approaches
The first step in PERT or CPM is to divide the entire project into significant activities. Two
approaches for drawing a project network:
Activity on node (AON): A network diagram in which nodes designate activities.
Activity on arrow (AOA): A network diagram in which arrows designate activities.
In an AOA network the nodes represent the starting and finishing times of an activity and are
also called events. So nodes in AOA consume neither time nor resources.
AOA approach sometimes needs the addition of a dummy activity to clarify relationships.
Dummy activity: An activity having no time that is inserted into a network to maintain the logic
of the network.
Many of the project management software packages use AON networks.
A project network is a diagram of all the activities and the precedence relationships that exist
between these activities in a project.
Dummy activities are common in AOA networks.
Determining the Project Schedule
Critical path analysis: A process to find the most effective sequence of activities that helps
determine a project schedule. To find the critical path, we calculate two distinct starting and
ending times for each activity. These are:
Earliest start (ES) = earliest time at which an activity can start, assuming all predecessors have