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© Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project management; Chapter7
MGMT 405, POM, 2010/11. Lec Notes
Chapter 7: Project Management
Department of Business Administration
FALL 2010-2011
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Outline: What You Will Learn . . .
Discuss the behavioral aspects of projects in terms of project personnel and the project manager.
Discuss the nature and importance of a work breakdown structure in project management.
Give a general description of PERT/CPM techniques. Construct simple network diagrams. List the kinds of information that a PERT or CPM analysis can
provide. Analyze networks with deterministic times. Analyze networks with probabilistic times. Describe activity “crashing” and solve typical problems.
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Project Management; Chapter7
Project:Project: Unique, one-time operations designed Unique, one-time operations designed to accomplish a specific set of objectives in a to accomplish a specific set of objectives in a limited time frame.limited time frame.
Build A
A Done
Build B
B Done
Build C
C Done
Build D
Ship
JAN FEB MAR APR MAY JUN
On time!
Projects
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Project Management; Chapter7
Project 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
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 communication
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Project Management; Chapter7
Project 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
What are the tools? Work breakdown structure Network diagram Gantt charts Risk management
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Project Management; Chapter7
Deciding which projects to implement Criteria-attractive-cost and benefit-available fund
Selecting a project manager Central person
Selecting a project team Person’s knowledge and skills-relationship with others
Planning and designing the project Goals-timetable-budget-resources
Managing and controlling project resources Personnel-equipment-budget
Deciding if and when a project should be terminated Likelihood of success-costs-resources
Key Decisions
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Project Management; Chapter7
Project Manager
Responsible for:
Work Quality
Human Resources Time
Communications Costs
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Temptation to understate costsWithhold informationMisleading status reportsFalsifying recordsComprising workers’ safetyApproving substandard work
Ethical Issues
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Project Management; Chapter7
Project Life Cycle
Concept
FeasibilityFeasibility
PlanningPlanning
ExecutionExecution
TerminationTermination
Man
agem
ent
Concept: A proposal neededFeasibility: Cost, benefit and risk analysesPlanning: find out the necessary human resources, time and costExecution: control for time, available resource and costTermination: It should be reevaluated for the sake of project’s safety
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Work Breakdown Structure
Project XProject X
Level 1
Level 2
Level 3
Level 4
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Project Management; Chapter7
Planning 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; Chapter7
PERT and CPM
PERT: Program Evaluation and Review TechniqueCPM: Critical Path MethodBoth techniques are widely used for planning and
coordinating large-scale projects. Using the two techniques, manager are able to obtain:
Graphically displays project activitiesEstimates how long the project will take Indicates most critical activitiesShow where delays will not affect project
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Project Management; Chapter7
The Network DiagramNetwork (precedence) diagram – diagram of
project activities that shows sequential relationships by the use of arrows and nodes.
Activity-on-arrow (AOA) – a network diagram convention in which arrows designate activities.
Activity-on-node (AON) – a network diagram convention in which nodes designate activities.
Activities – steps in the project that consume resources and/or time.
Events – the starting and finishing of activities, designated by nodes in the AOA convention.
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Project Management; Chapter7
The Network DiagramPath
Sequence of activities that leads from the starting node to the finishing node
Critical pathThe longest path; determines expected project duration
Critical activitiesActivities on the critical path
SlackAllowable slippage for path; the difference the length
of path and the length of critical path
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Project Network – Activity on Arrow
1
2
3
4
5 6
Locatefacilities
Orderfurniture
Furnituresetup
InterviewHire andtrain
Remodel
Move in
AOA
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Project Network – Activity on Node
1
2
3
5
6
Locatefacilities
Orderfurniture
Furnituresetup
Interview
RemodelMove in
4
Hire andtrain
7S
AON
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Project Management; Chapter7
Network Conventions
a
b
c ab
c
a
b
c
d
a
b
c
Dummyactivity
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Project Management; Chapter7
Time Estimates
The main determinant of the way PERT and CPM networks are analysed and interpreted is whether activity time estimates are probabilistic or deterministic.
DeterministicTime estimates that are fairly certain
ProbabilisticEstimates of times that allow for variation
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Project Management; Chapter7
Example-Bank Network convention
The following table contains information related to the major activities of a research project. Use the information to do the following:(a) Draw a precedence diagram using AOA and AON(b) Find the critical path based AOA.(c) Determine the expected length of the project.
Activity Immediate Predecessor Expected Time (days)
a - 5
c a 8
d c 2
b a 7
e - 3
f e 6
i b, d 10
m f,i 8
g - 1
h g 2
k h 17
end k,m
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Project Management; Chapter7
Answer-Bank Network convention
c
a
f
g
h
d
Activities with no predecessors are at the beginning (life side) of the network. Activities with multiple predecessors are located at path intersections. Use first AOA
5
8 2b
7
e
36
i
10
m
8
1
2
k
17
S
End
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-Bank Network convention
c
a
f
g h
Activities with no predecessors are at the beginning (life side) of the network. Activities with multiple predecessors are located at path intersections. Use Second AON
b
e
mS
End
b
d
i
f
k
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Example-Bank Network convention
(b)Find the critical path based AOA.
a-c-d-i-m*=5+8+2+10+8=33#
a-b-i-m=5+7+10+8=30e-f-m= 3+6+8=17g-h-k=1+2+17=20
a-c-d-i-m*-Critical path
(c) Determine the expected length of the project.
33 # -Expected project duration
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Project Management; Chapter7
Example-Bank Network Figure
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
Bank Network questionBank Network question
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Example-Bank Network Figure
Given the information on the bank network:
DetermineThe length of each pathThe critical pathThe expected length of the projectThe amount of slack time for each path Knowledge of slack times provides managers with
information for planning allocation of scarce resources and for directing control efforts toward those activities that may be most susceptible to delaying the project.
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-Bank Network Figure
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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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Network activitiesES: early startEF: early finish-EF=ES+tLS: late start-LS=LF-tLF: late finish
Used to determineExpected project durationSlack time-LS-ES or LF-EFCritical path
Computing Algorithm
ES t EF
LS LFES t EF
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Project Management; Chapter7
Example-ES-EF-LS-LF-slack
1
2
3
4
5 60
8 8
8 6 1
4
14 3 17
0 4 44
9
13
8 11 1919 1 20
LS LFES t EF
ES t EF
EF: early finish-EF=ES+tLS: late start-LS=LF-tSlack time-LS-ES or LF-EF
Required: Compute slack time, ES, EF, LS and LF
Forward pass
Backward pass
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-ES-EF-LS-LF-slack
1
2
3
4
5 60
8 8
8 6 1
4
14 3 17
0 4 44
9
13
8 11 1919 1 20
ES t EFLS LF
ES t EF
19 1 2019 200
EF: early finish-EF=ES+tLS: late start-LS=LF-tSlack time-LS-ES or LF-EF
10 9 194 136
6 4 10 0 46
8 11 19 8 190
16 3 1914 172
10 6 168 14 2
0 8 80 80
Forward pass
Backward pass
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Probabilistic Time Estimates
Optimistic timeTime required under optimal conditions
Pessimistic timeTime required under worst conditions
Most likely timeMost probable length of time that will be required
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Project Management; Chapter7
Probabilistic Estimates
Activitystart
Optimistictime
Most likelytime (mode)
Pessimistictime
to tptm te
Beta Distribution is generally used to describe the inherent variability in timeEstimates. Although there is no real theoretical justification for using the BetaDistribution, it has certain features that make it attractive in practice.
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Expected Time
te = to + 4tm +tp
6
te = expected timeto = optimistic timetm = most likely timetp = pessimistic time
The knowledge of the expected path times and their std. Deviation enables a manager to compute probabilistic estimates of the project completion time as such specific time and scheduled time
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Project Management; Chapter7
Variance
(tp – to)2
36
= varianceto = optimistic timetp = pessimistic time
The size of Variance reflects the degree of uncertainty associated with an activity’s time: The large the variance, the greater the uncertainty.
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Project Management; Chapter7
ExampleExample-Probabilistic Time Estimates-Probabilistic Time Estimates
1-3-4a
3-4-5d
3-5-7e
5-7-9f
2-4-6b
4-6-8h
2-3-6g 3-4-6
i
2-3-5cOptimistictime
Most likelytime
Pessimistictime
Given the following diagram: Compute The expected timeThe expected durationIdentify the critical pathThe varianceThe std. deviation
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-Probabilistic Time EstimatesProbabilistic Time Estimates
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Project Management; Chapter7
Answer-Probabilistic Time EstimatesProbabilistic Time Estimates
2.83a
4.00d
5.0e
7.0f
4.00b
6.0h
3.33g 4.17
i
3.17c
Tabc = 10.0Tdef = 16.0Tghi = 13.50
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Project Management; Chapter7
Path Probabilities
Z = Specified time – Path meanPath standard deviation
Z indicates how many standard deviations of the path distribution the specified time is beyond the expected path duration. The more positive the value, the better. A negative value of z indicates that the specified time is earlier than the expected path duration. Z=+3.00-probability 100%- From the relevant table +3.00 is almost equal to 0.9987.
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Project Management; Chapter7
Example-The Path probability
Given the information on the exampleexample of probabilistic of probabilistic time estimates (the previous example):time estimates (the previous example):
DetermineThe probability that the project can be completed within 17
weeks of its start. The probability that the project will be completed within 15
weeks of its start.The probability that the project will not be completed within
15 weeks of its start.
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-The Path probabilityDetermine
The probability that the project can be completed within 17 weeks of its start. Path: a-b-c
Z = 17 – 100.97
=7.22Determine
The probability that the project will be completed within 17 weeks of its start. Path: d-e-f
Z = 17 – 161
=1
Prob.comp in 17 week=1.00Appendix B, Table B, p.p 884/5
Prob.comp in 17 week=0.8413Appendix B, Table B, p.p 885
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-The Path probabilityDetermine
The probability that the project will be completed within 17 weeks of its start. Path: g-h-i
Z = 17 – 13.51.07
=3.27 Prob.comp in 17 week=1.00Appendix B, Table B, p.p 884/5
Prob finish in 17 week=1.00 X 0.8413 X 1.00= 0.8413
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-The Path probabilityDetermine
The probability that the project can be completed within 15 weeks of its start. Path: a-b-c
Z = 15 – 100.97
=5.15Determine
The probability that the project will be completed within 15 weeks of its start. Path: d-e-f
Z = 15 – 161
=-1.00
Prob.comp in 15 week=1.00Appendix B, Table B, p.p 884/5
Prob.comp in 15 week=0.1587Appendix B, Table B, p.p 885
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Answer-The Path probability
DetermineThe probability that the project will be completed within
15 weeks of its start. Path: g-h-i
Z = 15 – 13.51.07
=1.40 Prob.comp in 15 week=0.9192Appendix B, Table B, p.p 884/5
The probability that the project will not be completed within 15 weeks of its start: 1- 0.1459=0.8541
Prob finish in 15 week=1.00 X 0.1587 X 0.9192= 0.1459
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
17Weeks
Weeks
Weeks
Weeks
10.0
16.0
13.5
1.00
1.00
a-b-c
d-e-f
g-h-i
Answer-The Path probability-Graphically
0.8413
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
15Weeks
Weeks
Weeks
Weeks
10.0
16.0
13.5
1.00
0.9192
a-b-c
d-e-f
g-h-i
Answer-The Path probability-Graphically
0.1587
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Project Management; Chapter7
Time-cost Trade-offs: Crashing In many projects, it is possible to reduce the length of a
project by injecting additional resources. The impetus to shorten projects may reflect efforts to avoid late penalties, or/ to take advantage of monetary incentives for timely completion of a project, or/ to free resources for use on other projects. This is called crashing.
Crash – briefly, shortening activity duration Procedure for crashing
Crash the project one period at a time Only an activity on the critical path Crash the least expensive activity Multiple critical paths: find the sum of crashing the least
expensive activity on each critical path
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Time-Cost Trade-Offs: Crashing
TotalcostTotalcost
ShortenShorten
ShortenShorten
Cumulative (direct)cost of crashing
Cumulative (direct)cost of crashing
Expected indirect costsExpected indirect costs
Optimum
CRASHCRASH
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MGMT 405, POM, 2010/11. Lec Notes © Stevenson, McGraw Hill, 2007- Assoc. Prof. Sami Fethi, EMU, All Right Reserved.
Project Management; Chapter7
Example-Crashing
Using the following information, develop the optimal time cost solution. Indirect costs are $ 1000 per day.(a) Determine which activities are on the critical path, its length, and the
length of the other path(b) Rank the critical activities in order of lowest crashing cost, and
datermine the number of days each can be crashed.(c) Determine the critical path after each reduction by shortening the
project.
ActivityImmediate
predecessorNormal time Crash time
Cost per day to crash
a - 6 6
c - 10 8 $500
d c 5 4 300
b a 4 1 700
e d 9 7 600
f b,e 2 1 800
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Project Management; Chapter7
6a
4d
5c
10b
9 e
2f
(a) Determine the critical path.
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Project Management; Chapter7
Answer-Crashing
(a) Determine which activities are on the critical path, its length, and the length of the other path
Path lengtha-b-f 18
c-d-e-f 20 (critical path)
(b) Rank the critical activities in order of lowest crashing cost, and datermine the number of days each can be crashed.
Activity Cost per day to crash Available daysc $ 300 1e 600 2d 700 3f 800 1
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Project Management; Chapter7
Answer-Crashing
(c) Determine the critical path after each reduction by shortening the project.(1) Shorten activity c one day at a cost of $ 300. The length of the critical path becomes 19 days.(2) Activity c cannot be shorten any more. Shorten activity e one day at cost of $ 600. The length of the critical path c-d-e-f becomes 18 days which is the same as length of path a-b-f.(3) The path are now both critical, further improvement will necesitate shortening both paths.
Path Activity Cost per day to crash a-b-f a no reduction possible
b $ 500
f 800
c-d-e-f c no further reduction possible d
$ 700 e 600
f 800
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Project Management; Chapter7
Answer-Crashing
At the first glance, it would seem that crashing f would not be advantageous, because it has the highest crashing cost. However, f is on both paths, so shortening f by one day would shorten both paths by one day for a cost of $ 800. The option of shortening the least expensive activity on each path would cost $ 500 for b and $ 600 for e or $ 1100. Thus shorten f by one day. The project duration is now 17 days.(4) At this point, no additional improvement is feasible. The cost to crash b is $ 500 and the cost to crash e is $ 600, for a total of $ 1100 and that would exceed the indirect costs of $ 100 per day.(5) The crashing sequence is summarized below:
Length after crashing n days Path n=0 1 2 3
a-b-f 18 18 18 17
c-d-e-f 20 19 18 17
activity crashed c e f cost $300 600 800
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Project Management; Chapter7
Advantages of PERT
Forces managers to organizeProvides graphic display of activities Identifies
Critical activitiesSlack activities
1
2
3
4
5 6
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Project Management; Chapter7
Limitations 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
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Project Management; Chapter7
Thanks