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2006 Prentice Hall, Inc. 3 1
OperationsManagement
Chapter 3 Project Management
2006 Prentice Hall, Inc.
PowerPoint presentation to accompanPowerPoint presentation to accompanHei!er"#en$erHei!er"#en$erPrinciples o% Operations Management, 6ePrinciples o% Operations Management, 6eOperations Management, &eOperations Management, &e
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Bechtel ProjectsBechtel Projects
Restoring over 650 oil wells in Kuwait left ablazeRestoring over 650 oil wells in Kuwait left ablazeor uncapped after Desert Storor uncapped after Desert Stor
Building !6 assive distribution centers in justBuilding !6 assive distribution centers in just
two "ears for the internet copan" #ebvantwo "ears for the internet copan" #ebvan$roup$roup
%onstructing &0 high'securit" data centers%onstructing &0 high'securit" data centersworldwide for ()uini*+ ,nc-worldwide for ()uini*+ ,nc-
Building and running a rail line between .ondonBuilding and running a rail line between .ondonand the %hannel /unnel 12-6 billion3and the %hannel /unnel 12-6 billion3
Developing an oil pipeline fro the %aspian SeaDeveloping an oil pipeline fro the %aspian Searegion to Russia 1450 illion3region to Russia 1450 illion3
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Bechtel ProjectsBechtel Projects
(*panding the Dubai irport in the ( 1600(*panding the Dubai irport in the ( 1600illion3+ and the 7iai irport in 8lorida 1!illion3+ and the 7iai irport in 8lorida 1!billion3billion3
Building li)uid natural gas plants in 9een 1!Building li)uid natural gas plants in 9een 1!billion3 and in /rinidad+ #est ,ndies 1: billion3billion3 and in /rinidad+ #est ,ndies 1: billion3
Building a new subwa" for thens+ $reece 1!-6Building a new subwa" for thens+ $reece 1!-6billion3billion3
%onstructing a natural gas pipeline in /hailand%onstructing a natural gas pipeline in /hailand1;00 illion31;00 illion3
Building a highwa" to lin< the north and south ofBuilding a highwa" to lin< the north and south of%roatia 1&0& illion3%roatia 1&0& illion3
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Strategic ,portance ofStrategic ,portance ofProject 7anageentProject 7anageent
Bechtel Kuwait Project=Bechtel Kuwait Project=
4+000 wor
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Strategic ,portance ofStrategic ,portance ofProject 7anageentProject 7anageent
7icrosoft #indows .onghorn Project7icrosoft #indows .onghorn Project==
hundreds of prograershundreds of prograers
illions of lines of codeillions of lines of code illions of dollars costillions of dollars cost
8ord Redesign of 7ustang Project=8ord Redesign of 7ustang Project=
250 eber project tea250 eber project tea
%ost 1;00'illion%ost 1;00'illion
!5> faster and &0> cheaper than!5> faster and &0> cheaper thancoparable project at 8ordcoparable project at 8ord
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Single unitSingle unit
7an" related activities7an" related activities
Difficult production planning andDifficult production planning andinventor" controlinventor" control
$eneral purpose e)uipent$eneral purpose e)uipent
?igh labor s
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(*aples of Projects(*aples of Projects
Building %onstructionBuilding %onstruction
Research ProjectResearch Project
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Project @rganizationProject @rganization
#or
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7anageent of Projects7anageent of Projects
PlanningPlanning' goal setting+ defining the' goal setting+ defining theproject+ tea organizationproject+ tea organization
SchedulingScheduling' relates people+ one"+' relates people+ one"+and supplies to specific activitiesand supplies to specific activitiesand activities to each otherand activities to each other
%ontrolling%ontrolling' onitors resources+' onitors resources+costs+ )ualit"+ and budgetsA revisescosts+ )ualit"+ and budgetsA revisesplans and shifts resources to eetplans and shifts resources to eettie and cost deandstie and cost deands
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PlanningPlanning
@bjectives@bjectives
ResourcesResources#or< brea
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Project Planning+Project Planning+
Scheduling+ and %ontrollingScheduling+ and %ontrolling
Figure 3.1Figure 3.1
BeforeBefore Start of projectStart of project DuringDuring
projectproject /ieline/ieline projectproject
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Project Planning+Project Planning+
Scheduling+ and %ontrollingScheduling+ and %ontrolling
Figure 3.1Figure 3.1
BeforeBefore Start of projectStart of project DuringDuring
projectproject /ieline/ieline projectproject
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Project Planning+Project Planning+
Scheduling+ and %ontrollingScheduling+ and %ontrolling
Figure 3.1Figure 3.1
BeforeBefore Start of projectStart of project DuringDuring
projectproject /ieline/ieline projectproject
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Project Planning+Project Planning+
Scheduling+ and %ontrollingScheduling+ and %ontrolling
Figure 3.1Figure 3.1
BeforeBefore Start of projectStart of project DuringDuring
projectproject /ieline/ieline projectproject
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Project Planning+Project Planning+
Scheduling+ and %ontrollingScheduling+ and %ontrolling
Figure 3.1Figure 3.1
BeforeBefore Start of projectStart of project DuringDuring
projectproject /ieline/ieline projectproject
Budgets
Dela"ed activities reportSlac< activities report
/iecost estiatesBudgets(ngineering diagras
%ash flow charts7aterial availabilit" details
%P7P(R/$antt charts7ilestone charts%ash flow schedules
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(stablishing objectives(stablishing objectives
Defining projectDefining project
%reating wor
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@ften teporar" structure@ften teporar" structure
ses specialists fro entire copan"ses specialists fro entire copan"
?eaded b" project anager?eaded b" project anager %oordinates activities%oordinates activities
7onitors schedule7onitors scheduleand costsand costs
PeranentPeranentstructure calledstructure calledEatri* organizationFEatri* organizationF
Project @rganizationProject @rganization
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Saple Project Saple Project
@rganization@rganization
TestEngineer
MechanicalEngineer
Project 1Project 1 Project
Manager
Technician
Technician
Project 2Project 2 Project
Manager
ElectricalEngineer
ComputerEngineer
Marketing FinanceHuman
Resources
Design Quality
Mgt
Prouction
Presient
Figure 3.2Figure 3.2
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7atri* @rganization7atri* @rganization
7ar
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/he Role of/he Role of
the Project 7anagerthe Project 7anager
?ighl" visible?ighl" visible
Responsible for a
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/he Role of/he Role of
the Project 7anagerthe Project 7anager
?ighl" visible?ighl" visible
Responsible for a
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#or< Brea
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#or< Brea
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,dentif"ing precedence,dentif"ing precedencerelationshipsrelationships
Se)uencing activitiesSe)uencing activitiesDeterining activit" ties costsDeterining activit" ties costs
(stiating aterial and wor
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Purposes of ProjectPurposes of Project
SchedulingScheduling:-:- Shows the relationship of each activit" toShows the relationship of each activit" to
others and to the whole projectothers and to the whole project
!-!- ,dentifies the precedence relationships,dentifies the precedence relationshipsaong activitiesaong activities
&-&- (ncourages the setting of realistic tie(ncourages the setting of realistic tie
and cost estiates for each activit"and cost estiates for each activit"2-2- ?elps a
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$antt chart$antt chart
%ritical Path 7ethod%ritical Path 7ethod
%P73%P73 Progra (valuationProgra (valuation
and Reviewand Review/echni)ue P(R/3/echni)ue P(R/3
Project 7anageentProject 7anageent/echni)ues/echni)ues
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Siple $antt %hart Siple $antt %hart
/ie 8 7 7 S
DesignProtot"pe
/est
ReviseProduction
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Passengers
Baggage
8ueling
%argo and ail
$alle" servicing
.avator" servicingDrin
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Project %ontrol ReportsProject %ontrol Reports
Detailed cost brea
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Cetwor< techni)uesCetwor< techni)ues
Developed in :M50FsDeveloped in :M50Fs
%P7 b" DuPont for cheical plants :M5;3%P7 b" DuPont for cheical plants :M5;3
P(R/ b" Booz+ llen ?ailton with theP(R/ b" Booz+ llen ?ailton with the-S- Cav"+ for Polaris issile :M543-S- Cav"+ for Polaris issile :M543
%onsider precedence relationships and%onsider precedence relationships and
interdependenciesinterdependencies (ach uses a different estiate of(ach uses a different estiate of
activit" tiesactivit" ties
P(R/ and %P7P(R/ and %P7
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Si* Steps P(R/ %P7Si* Steps P(R/ %P7
:-:- Define the project and prepare theDefine the project and prepare thewor< brea
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Si* Steps P(R/ %P7Si* Steps P(R/ %P7
2-2- ssign tie andor cost estiatesssign tie andor cost estiatesto each activit"to each activit"
5-5- %opute the longest tie path%opute the longest tie paththrough the networ
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:- #hen will the entire project becopletedN
!- #hat are the critical activities or tas
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5- ,s the project on schedule+ behindschedule+ or ahead of scheduleN
6- ,s the one" spent e)ual to+ less than+ orgreater than the budgetN
;- re there enough resources available tofinish the project on tieN
4- ,f the project ust be finished in a shortertie+ what is the wa" to accoplish thisat least costN
Ouestions P(R/ %P7Ouestions P(R/ %P7
%an nswer%an nswer
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%oparison of @C and %oparison of @C and@ Cetwor< %onventions@ Cetwor< %onventions
ctivit" on ctivit" ctivit" onCode @C3 7eaning rrow @3
coes before
B+ which coesbefore %a3 B % B %
and B ust bothbe copletedbefore % can start
b3
%%
B
B
B and % cannotbegin until iscopleted
c3
B
%
B
%Figure 3.5Figure 3.5
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%oparison of @C and %oparison of @C and@ Cetwor< %onventions@ Cetwor< %onventions
ctivit" on ctivit" ctivit" onCode @C3 7eaning rrow @3
% and D cannotbegin until and B haveboth beencopleted
d3
B
%
D B
%
D
% cannot beginuntil both and Bare copletedA Dcannot begin untilB is copleted- du" activit" isintroduced in @
e3%
B D
Du" activit"
B
%
D
Figure 3.5Figure 3.5
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%oparison of @C and %oparison of @C and@ Cetwor< %onventions@ Cetwor< %onventions
ctivit" on ctivit" ctivit" onCode @C3 7eaning rrow @3
B and % cannotbegin until iscopleted- Dcannot beginuntil both B and% are copleted-
du"activit" is againintroduced in
@-
f3
%
DB B
%
D
Du"
activit"
Figure 3.5Figure 3.5
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@C (*aple@C (*aple
ctivit"ctivit" DescriptionDescription,ediate,ediate
PredecessorsPredecessors
Build internal coponentsBuild internal coponents
BB 7odif" roof and floor7odif" roof and floor
%% %onstruct collection stac
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@C Cetwor< for@C Cetwor< for
7ilwau
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@C Cetwor< for@C Cetwor< for
7ilwau
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??
,nspect,nspect/est3/est3
;;Du"Du"ctivit"ctivit"
@ Cetwor< for@ Cetwor< for
7ilwau
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Deterining the ProjectDeterining the Project
ScheduleSchedulePerfor a %ritical Path nal"sisPerfor a %ritical Path nal"sis
/he critical path is the longest path/he critical path is the longest path
through the networ
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Deterining the ProjectDeterining the Project
ScheduleSchedulePerfor a %ritical Path nal"sisPerfor a %ritical Path nal"sis
ctivit" Description /ie wee
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Deterining the ProjectDeterining the Project
ScheduleSchedulePerfor a %ritical Path nal"sisPerfor a %ritical Path nal"sis
Table 3.2Table 3.2
ctivit" Description /ie wee
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Deterining the ProjectDeterining the Project
ScheduleSchedulePerfor a %ritical Path nal"sisPerfor a %ritical Path nal"sis
Figure 3.10Figure 3.10
ctivit" Caeor S"bol
(arliestStart
(S(arliest8inish(8
.atestStart
.S .atest8inish
.8
ctivit" Duration
2
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8orward Pass8orward Pass
Begin at starting event and wor< forwardBegin at starting event and wor< forward
(arliest Start /ie Rule=
,f an activit" has onl" one iediatepredecessor+ its (S e)uals the (8 of thepredecessor
,f an activit" has ultiple iediatepredecessors+ its (S is the a*iu of
all the (8 values of its predecessors
(S 7a* (8 of all iediate predecessors3
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8orward Pass8orward Pass
Begin at starting event and wor< forwardBegin at starting event and wor< forward
(arliest 8inish /ie Rule=
/he earliest finish tie (83 of an activit"is the su of its earliest start tie (S3and its activit" tie
(8 (S ctivit" tie
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(S(8 Cetwor< for(S(8 Cetwor< for
7ilwau
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B
3
(S(8 Cetwor< for(S(8 Cetwor< for
7ilwau
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%
2
2 4
(S(8 Cetwor< for(S(8 Cetwor< for
7ilwau
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%
2
2 4
(S(8 Cetwor< for(S(8 Cetwor< for
7ilwau
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D
4
3 7
%
2
2 4
(S(8 Cetwor< for(S(8 Cetwor< for
7ilwau
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(
4
8
3
$
5
?
2
4 8 13 15
4
8 13
7
D
4
3 7
%
2
2 4
(S(8 Cetwor< for(S(8 Cetwor< for
7ilwau
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Bac
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Bac
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.S.8 /ies for.S.8 /ies for
7ilwau
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.S.8 /ies for.S.8 /ies for
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.S.8 /ies for.S.8 /ies for
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.S.8 /ies for.S.8 /ies for7ilwau
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%oputing Slac< /ie%oputing Slac< /ie
fter coputing the (S+ (8+ .S+ and .8 tiesfter coputing the (S+ (8+ .S+ and .8 tiesfor all activities+ copute the slac< or freefor all activities+ copute the slac< or freetie for each activit"tie for each activit"
Slac< is the length of tie an activit" canbe dela"ed without dela"ing the entire
project
Slac< .S G (S or Slac< .8 G (8
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%oputing Slac< /ie%oputing Slac< /ie
(arliest (arliest .atest .atest @nStart 8inish Start 8inish Slac< %ritical
ctivit" (S (8 .S .8 .S G (S Path
0 2 0 2 0 9es
B 0 3 1 4 1 Co% 2 4 2 4 0 9esD 3 7 4 8 1 Co( 4 8 4 8 0 9es8 4 7 10 13 6 Co$ 8 13 8 13 0 9es? 13 15 13 15 0 9es
Table 3.3Table 3.3
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%ritical Path for%ritical Path for7ilwau
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(S G (8 $antt %hart(S G (8 $antt %hart
for 7ilwau
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.S G .8 $antt %hart.S G .8 $antt %hart
for 7ilwau
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%P7 assues we
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/hree tie estiates are re)uired/hree tie estiates are re)uired
@ptiistic tie a3 G if ever"thing goes@ptiistic tie a3 G if ever"thing goes
according to planaccording to plan7ost7ostGGli
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(stiate follows beta distribution(stiate follows beta distribution
Lariabilit" in ctivit" /iesLariabilit" in ctivit" /ies
(*pected tie=(*pected tie=
Lariance of ties=Lariance of ties=
t t ((a a 44++ bb)/6)/6
v v [([(bb aa)/6])/6]22
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(stiate follows beta distribution(stiate follows beta distribution
Lariabilit" in ctivit" /iesLariabilit" in ctivit" /ies
(*pected tie=(*pected tie=
Lariance of ties=Lariance of ties=
t t ((a a 44++ bb)/6)/6
v v [([(bb aa)/6]2)/6]2 Probabilit"of 1in 100of b occurring
Probabilit" of1 in 100 of! a occurring
Probabilit"
@ptiistic/ie a3
7ost .i
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%oputing Lariance%oputing Lariance
7ost (*pected @ptiistic .i
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Probabilit" of ProjectProbabilit" of Project%opletion%opletion
Project variance is coputed b"Project variance is coputed b"suing the variances of criticalsuing the variances of criticalactivitiesactivities
22 Project variance Project variance
((variances of activitiesvariances of activities
on critical pathon critical path))
p
P b bili f P jP b bilit f P j t
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Probabilit" of ProjectProbabilit" of Project%opletion%opletion
Project variance is coputed b"Project variance is coputed b"suing the variances of criticalsuing the variances of criticalactivitiesactivitiesProject variance
2 " .11 + .11 + 1.00 + 1.78 + .11 " 3.11
#r$%e&' 'a*ar* *eia'i$
p " #r$%e&' aria&e
" 3.11 " 1.76 ee-
p
P b bilit f P j tP b bilit f P j t
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Probabilit" of ProjectProbabilit" of Project%opletion%opletion
P(R/ a
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Probabilit" of ProjectProbabilit" of Project%opletion%opletion
Standard deviation" 1.76 wee
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Probabilit" of ProjectProbabilit" of Project%opletion%opletion
#hat is the probabilit" this project can#hat is the probabilit" this project canbe copleted on or before thebe copleted on or before the 1616wee
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Probabilit" of ProjectProbabilit" of Project%opletion%opletion
#hat is the probabilit" this project can#hat is the probabilit" this project canbe copleted on or before the :6 wee
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Probabilit" of ProjectProbabilit" of Project%opletion%opletion
/ie
Probabilit"/ 16 wee
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Deterining ProjectDeterining Project%opletion /ie%opletion /ie
Probabilit"of 0.01
T
Figure 3.17
8ro ppendi* ,
Probabilit"of 0.99
2.33 Standarddeviations
0 2.33
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Lariabilit" of %opletionLariabilit" of %opletion
/ie for Concritical Paths/ie for Concritical Paths Lariabilit" of ties for activities onLariabilit" of ties for activities on
noncritical paths ust benoncritical paths ust be
considered when finding theconsidered when finding theprobabilit" of finishing in aprobabilit" of finishing in aspecified tiespecified tie
Lariation in noncritical activit" a"Lariation in noncritical activit" a"cause change in critical pathcause change in critical path
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#hat Project 7anageent#hat Project 7anageent
?as Provided So 8ar?as Provided So 8ar /he projectFs e*pected copletion tie/he projectFs e*pected copletion tie
isis 1515wee
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/rade'@ffs nd Project/rade'@ffs nd Project
%rashing%rashing
/he project is behind schedule/he project is behind schedule
/he copletion tie has been/he copletion tie has beenoved forwardoved forward
,t is not uncoon to face the,t is not uncoon to face thefollowing situations=following situations=
Shortening the duration of theproject is called project crashing
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8actors to %onsider #hen8actors to %onsider #hen
%rashing Project%rashing Project /he aount b" which an activit" is/he aount b" which an activit" is
crashed is+ in fact+ perissiblecrashed is+ in fact+ perissible
/a
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Steps in Project %rashingSteps in Project %rashing
:-:- %opute the crash cost per tie period-%opute the crash cost per tie period-,f crash costs are linear over tie=,f crash costs are linear over tie=
%rash cost%rash costper periodper period
""%rash cost G Coral cost3%rash cost G Coral cost3
Coral tie G %rash tie3Coral tie G %rash tie3
!-!- sing current activit" ties+ find thesing current activit" ties+ find the
critical path and identif" the criticalcritical path and identif" the criticalactivitiesactivities
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Steps in Project %rashingSteps in Project %rashing
&-&- ,f there is onl" one critical path+ then,f there is onl" one critical path+ thenselect the activit" on this critical pathselect the activit" on this critical paththat a3 can still be crashed+ and b3 hasthat a3 can still be crashed+ and b3 hasthe sallest crash cost per period- ,fthe sallest crash cost per period- ,fthere is ore than one critical path+ thenthere is ore than one critical path+ thenselect one activit" fro each critical pathselect one activit" fro each critical pathsuch that a3 each selected activit" cansuch that a3 each selected activit" canstill be crashed+ and b3 the total crashstill be crashed+ and b3 the total crash
cost of all selected activities is thecost of all selected activities is thesallest- Cote that a single activit" a"sallest- Cote that a single activit" a"be coon to ore than one criticalbe coon to ore than one critical
path-path-
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Steps in Project %rashingSteps in Project %rashing
2-2- pdate all activit" ties- ,f the desiredpdate all activit" ties- ,f the desireddue date has been reached+ stop- ,f not+due date has been reached+ stop- ,f not+return to Step !-return to Step !-
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%rashing /he Project%rashing /he Project
/ie #
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%rash and Coral /ies%rash and Coral /iesand %osts for ctivit" Band %osts for ctivit" B
V V V
:: !! && /ie #ee
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%ritical Path nd Slac< /ies%ritical Path nd Slac< /ies8or 7ilwau
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dvantages of P(R/%P7dvantages of P(R/%P7
:-:- (speciall" useful when scheduling and(speciall" useful when scheduling andcontrolling large projectscontrolling large projects
!-!- Straightforward concept and notStraightforward concept and not
atheaticall" cople*atheaticall" cople*
&-&- $raphical networ
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dvantages of P(R/%P7dvantages of P(R/%P7
5-5- Project docuentation and graphicsProject docuentation and graphicspoint out who is responsible for variouspoint out who is responsible for variousactivitiesactivities
6-6- pplicable to a wide variet" of projectspplicable to a wide variet" of projects
;-;- seful in onitoring not onl" schedulesseful in onitoring not onl" schedulesbut costs as wellbut costs as well
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:-:- Project activities have to be clearl"Project activities have to be clearl"defined+ independent+ and stable in theirdefined+ independent+ and stable in theirrelationshipsrelationships
!-!- Precedence relationships ust bePrecedence relationships ust bespecified and networ
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sing 7icrosoft Projectsing 7icrosoft Project
#r$gra 3.1
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sing 7icrosoft Projectsing 7icrosoft Project
#r$gra 3.2
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sing 7icrosoft Projectsing 7icrosoft Project
#r$gra 3.3
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sing 7icrosoft Projectsing 7icrosoft Project
#r$gra 3.4
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sing 7icrosoft Projectsing 7icrosoft Project
#r$gra 3.5
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sing 7icrosoft Projectsing 7icrosoft Project
#r$gra 3.6
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sing 7icrosoft Projectsing 7icrosoft Project
#r$gra 3.7