CBMC 1 OPERATIONS MANAGEMENT WITH TQM

HANDOUT #8
Project Management

Introduction:
This handout is a simplified reference material containing the most important elements of
successful project management in order to disseminate clear guidelines and templates. It
addresses essential subject areas, such as what constitutes project management decision
and those specific stages that can be projected as specific life-cycle of project management,
and the pivotal role of planning and scheduling. Furthermore, it covers details of project
controlling mechanism that is used for tracking and reporting project progress and where
necessary address issues concerning deviations from the initial project plan as well as a range
of management methods suitable for application in a given project. Presenting various
approaches to defining precise project calendars and employing instruments like Gantt charts
and the Critical Path Method (CPM), this reference provides novices and veteran project
managers with all the conceptual tools and real-life tactics to manage projects with
unprecedented efficiency.

Date and Time Allotment:

Week 12 & 13 (6 hours)

Objectives:
1. Decisions in Project Management
2. Describe the Phases of Project Management
3. Understand the importance of Project Plans
4. Understand Project Scheduling, and Controlling
5. Identify Project Management Techniques
6. Determine Project Schedules.

Lecture:

Project Management
Managers typically oversee a variety of operations. Some of these involve routine, repetitive
activities, but others involve non-routine activities. Under the latter heading are projects, a
unique, one-time operations designed to accomplish a set of objectives in a limited period.
Other examples of projects include constructing a shopping complex, merging two companies,
putting on a play, and designing and running a political campaign.

Projects may involve considerable cost. Some have a long time horizon, and some involve a
large number of activities that must be carefully planned and coordinated. Most are expected
to be completed based on time, cost, and performance targets. To accomplish this, goals
must be established and priorities set. Tasks must be identified and time estimates made.
Resource requirements also must be projected and budgets prepared.

Key Decisions of Managing Project

The project manager bears the ultimate responsibility for the success or failure of the project.
He or she must be capable of working through others to accomplish the objectives of the
project.

The project manager is responsible for effectively managing each of the following:

1. The work, so that all of the necessary activities are accomplished in the desired
sequence, and performance goals are met.
 2. The human resources, so that those working on the project have direction and
motivation.
3. Communications, so that everybody has the information needed to do the work.
4. Quality, so that performance objectives are realized.
5. Time, so that the project is completed on schedule.
6. Costs, so that the project is completed within budget.

Phases of Project Management

Projects that take months or years to complete are usually developed outside the normal
production system. Project organizations within the firm may be set up to handle such jobs
and are often disbanded when the project is complete. On other occasions, managers find
projects just a part of their job. The management of projects involves three phases:

a. Planning: This phase includes goal setting, defining the project, and team
organization;
b. Scheduling: This phase relates people, money, and supplies to specific activities
and relates activities to each other; and
c. Controlling: This phase the firm monitors resources, costs, quality, and budgets.
It also revises or changes plans and shifts resources to meet time and cost
demands.

Project Planning

Projects can be defined as a series of related tasks directed toward a major output. In some
firms, a project organization is developed to make sure existing programs continue to run
smoothly on a day-to-day basis while new projects are successfully completed. For companies
with multiple large projects, such as a construction firm, a project organization is an effective
way of assigning the people and physical resources needed. It is a temporary organization
structure designed to achieve results by using specialists from throughout the firm.

The project organization may be most helpful when:

1. Work tasks can be defined with a specific goal and deadline.

2. The job is unique or somewhat unfamiliar to the existing organization.
3. The work contains complex interrelated tasks requiring specialized skills.
4. The project is temporary but critical to the organization.
5. The project cuts across organizational lines.

a. Project Manager
Project team members are temporarily assigned to a project and report to the project
manager. The manager heading the project coordinates activities with other
departments and reports directly to top management. Project managers receive high
 visibility in a firm and 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; and (4) the people assigned to the project
receive the motivation, direction, and information needed to do their jobs. This means
that project managers should be good coaches and communicators, and be able to
organize activities from a variety of disciplines.

b. Work Breakdown Structure

The project management team begins its task well in advance of project execution so
that a plan can be developed. One of its first steps is to carefully establish the project’s
objectives, then break the project down into manageable parts. This work breakdown
structure (WBS) defines the project by dividing it into its major subcomponents (or
tasks), which are then subdivided into more detailed components, and finally into a set
of activities and their related costs. The division of the project into smaller and smaller
tasks can be difficult, but is critical to managing the project and to scheduling success.
Gross requirements for people, supplies, and equipment are also estimated in this
planning phase.

Project Scheduling

Project scheduling involves sequencing and allotting time to all project activities. At this
stage, managers decide how long each activity will take and compute the resources needed
at each stage of production. Managers may also chart separate schedules for personnel needs
by type of skill (management, engineering, or pouring concrete, for example) and material
needs.

One popular project scheduling approach is the Gantt chart. Gantt charts 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, and (4) overall project time is developed

PERT and CPM, the two widely used network techniques, have the ability to consider
precedence relationships and interdependency of activities. On complex projects, the
scheduling of which is usually computerized, PERT and CPM thus have an edge over the
simpler Gantt charts. Even on huge projects, though, Gantt charts can be used as summaries
of project status and may complement the other network approaches.

To summarize, whatever the approach taken by a project manager, project scheduling serves
several purposes:

1. It shows the relationship of each activity to others and to the whole project.
2. It identifies the precedence relationships among activities.
3. It encourages the setting of realistic time and cost estimates for each activity.
 4. It helps make better use of people, money, and material resources by identifying
critical bottlenecks in the project.

Project Controlling

The control of projects, like the control of any management system, involves close monitoring
of resources, costs, quality, and budgets. Control also means using a feedback loop to revise
the project plan and having the ability to shift resources to where they are needed most.

Controlling projects can be difficult. The stakes are high; cost overruns and unnecessary
delays can occur due to poor planning, scheduling, and controls. Some projects are “well-
defined,” whereas others may be “ill-defined.” Projects typically only become well-defined after
detailed extensive initial planning and careful definition of required inputs, resources,
processes, and outputs. Well-established projects where constraints are known (e.g.,
buildings and roads) and engineered products (e.g., airplanes and cars) with well-defined
specifications and drawings may fall into this category. Well-defined projects are assumed to
have changes small enough to be managed without substantially revising plans.

Project Management Techniques

Program evaluation and review technique (PERT) and the critical path method (CPM) were
both developed in the 1950s to help managers schedule, monitor, and control large and
complex projects. CPM arrived first, as a tool developed to assist in the building and
maintenance of chemical plants at DuPont. Independently, PERT was developed in 1958 for
the U.S. Navy.

a. Program evaluation and review technique (PERT) - A project management

technique that employs three time estimates for each activity.
b. Critical path method (CPM) - A project management technique that uses only one
time factor per activity.

Framework of PERT and CPM

 Define the project and prepare the work breakdown structure.

 Develop the relationships among the activities. Decide which activities must precede
and which must follow others.
 Draw the network connecting all the activities.
  Assign time and/or cost estimates to each activity.
 Compute the longest time path through the network. This is called the critical path.
 Use the network to help plan, schedule, monitor, and control the project.

Importance of PERT and CPM

PERT and CPM are important because they can help answer questions such as the following
about projects with thousands of activities:

 When will the entire project be completed?

 What are the critical activities or tasks in the project—that is, which activities will delay
the entire project if they are late?
 Which are the noncritical activities—the ones that can run late without delaying the
whole project’s completion?
 What is the probability that the project will be completed by a specific date?
 At any particular date, is the project on schedule, behind schedule, or ahead of
schedule?
 On any given date, is the money spent equal to, less than, or greater than the budgeted
amount?
 Are there enough resources available to finish the project on time?
 If the project is to be finished in a shorter amount of time, what is the best way to
accomplish this goal at the least cost?

Network Diagrams and Approaches

The first step in a PERT or CPM network is to divide the entire project into significant activities
in accordance with the work breakdown structure. There are two approaches for drawing a
project network: activity on node (AON) and activity on arrow (AOA). Under the AON
convention, nodes designate activities. Under AOA, arrows represent activities. Activities
consume time and resources. The basic difference between AON and AOA is that the nodes
in an AON diagram represent activities. In an AOA network, the nodes represent the starting
and finishing times of an activity and are called events. Therefore, nodes in AOA consume
neither time nor resources.

a. Activity-on-node (AON) - A network diagram in which nodes designate activities.

b. Activity-on-arrow (AOA) - A network diagram in which arrows designate activities.

Determining Project Schedule
To find out just how long the project will take, we perform the critical path analysis for the
network. The critical path is the longest time path through the network. To find the critical path,
we calculate two distinct starting and ending times for each activity. These are defined as
follows:

a. Earliest start (ES) = earliest time at which an activity can start, assuming all
predecessors have been completed
b. Earliest finish (EF) = earliest time at which an activity can be finished
c. Latest start (LS) = latest time at which an activity can start so as to not delay the
completion time of the entire project
d. Latest finish (LF) = latest time by which an activity has to finish so as to not delay
the completion time of the entire project

Variability in Activity Times

 In identifying all earliest and latest times so far, and the associated critical path(s), we
have adopted the CPM approach of assuming that all activity times are known and fixed
constants. That is, there is no variability in activity times. However, in practice, it is likely that
activity completion times vary depending on various factors.

Some activities may be relatively less prone to delays, others could be extremely
susceptible to delays. For example, activity B (modify roof and floor) could be heavily
dependent on weather conditions. A spell of bad weather could significantly affect its
completion time. This means that we cannot ignore the impact of variability in activity times
when deciding the schedule for a project. PERT addresses this issue.

In PERT, we employ a probability distribution based on three time estimates for each
activity, as follows:

a. Optimistic time (a) = time an activity will take if everything goes as planned. In
estimating this value, there should be only a small probability (say, 1/100) that the
activity time will be < a.
b. Pessimistic time (b) = time an activity will take assuming very unfavorable conditions.
In estimating this value, there should also be only a small probability (also 1/100) that
the activity time will be > b.
c. Most likely time (m) = most realistic estimate of the time required to complete an
activity.

Cost-Time Trade-Offs and Project Crashing

While managing a project, it is not uncommon for a project manager to be faced with
either (or both) of the following situations: (1) the project is behind schedule, and (2) the
scheduled project completion time has been moved forward. In either situation, some or all of
the remaining activities need to be speeded up (usually by adding resources) to finish the
project by the desired due date.
The process by which we shorten the duration of a project in the cheapest manner
possible is called project crashing.

Project crashing.
Crashing a project involves four steps:
1. Compute the crash cost per week (or other time period) for each activity in the
network. If crash costs are linear over time, the following formula can be used:

2. Using the current activity times, find the critical path(s) in the project network. Identify
the critical activities.
 3. If there is only one critical path, then select the activity on this critical path that (a) can
still be crashed and (b) has the smallest crash cost per period. Crash this activity by
one period. If there is more than one critical path, then select one activity from each
critical path such that (a) each selected activity can still be crashed and (b) the total
crash cost per period of all selected activities is the smallest. Crash each activity by
one period. Note that the same activity may be common to more than one critical path.
Update all activity times. If the desired due date has been reached, stop. If not, return to Step
2.

Activity:
Discussion on the Key Decisions of Managing Project, Phases of Project Management, Project
Planning, Project Scheduling, Project Controlling, Project Management Techniques,
Determining Project Schedule.

Assessment:
The students will take a 30-point multiple-choice quiz to gauge their understanding of project
management.

References:
 J.R. Evans. And W.M. Lindsay, Total Quality Management, Cengage Learning Asia,
2013.
 J. Heizer, B. Render, Operations Management, 10th Global Edition, New Jersey:
Pearson Education, 2011.
 S. Kale, Production and Operations Management, New Delhi, McGraw-Hill education,
2013.
 W.J. Stevenson, Operations Management 12th Edition. New York: McGraw-Hill
education, 2015.
 W.J Stevenson and S.C. Chuong, "Operations Management". 2nd Edition. New York:
McGraw-Hill education, 2014.
 Slack, N., Chambers, S., & Johnston, R. (2023). OPERATIONS MANAGEMENT (10th
ed.). Pearson Education Limited, 2023
 David Alan Collier, James R. Evans, William Lindsay (2020) Operations Management
and Total Quality Management, Cengage Learning Asia Pte Limited, 2020
 Facility Planning and Management Retrieved from:
https://www.mitsde.com/media/student%20corner/Next-Gen-
Learning/Sample%20PPT_Facility%20Location%20and%20Layout.pdf
 https://www.pmi.org/about/learn-about-pmi/what-is-project management
 https://www.projecttimes.com/articles/does-people-behavior-impact-projects-how-
and-what-do-we-do-about-it.html
 https://www.workamajig.com/blog/guide-to-work-breakdown-structures-wbs
 https://keydifferences.com/difference-between-pert-and-cpm.html
 https://hbr.org/1984/07/budget-choice-planning-versus-control
 https://en.wikipedia.org/wiki/Risk_management
 https://blog.hubspot.com/marketing/free-project-management-software

Prepared by:
Ryan O. Maramba, CHRA, CHRP, COMS, CSPE, LPT, DBA