Chapter 13. Project Management

1. Chapter 13.Project Management Yasar A. Ozcan

2. Outline • The Characteristics of Projects • The Project Manager • Managing Teams and Relationships on Projects • Planning and Scheduling with Gantt Charts • The Gantt Chart • Pert & CPM • The Network • Deterministic Approach- Critical Path Method • Probabilistic Approach • Project Compression (Crashing or time reduction in project length) Yasar A. Ozcan

3. The Characteristics of Projects • Projects are unique and non-routine endeavors, designed to accomplish a specified set of objectives (to create new products and services) in a limited time. • Typical examples of such non-routine projects are moving a hospital to a new location by a certain date, or renovating an outpatient facility to meet changing demand patterns. • Projects like those have considerable costs. They involve a large number of activities that must be carefully planned and coordinated to achieve the desired results, and may take a long time to complete. Yasar A. Ozcan

4. The Characteristics of Projects Life-cycle concept --projects go through a series of stages including, formulation and analysis, planning, implementation, and termination. Projects bring together personnel with diverse knowledge and skills, as their contributions are necessitated by the projects Yasar A. Ozcan

5. The Project Manager. . . • . . . Bears the ultimate responsibility for • completion of the project. • The pros and consof working on projects include: • The effect of expert full-time employees assigned to a project • Working for two bosses • Dynamic environment, thriving factor • Working with new people, team spirit Yasar A. Ozcan

6. Exhibit 13.1 Gantt Chart for Launching a New Radiation Oncology Service Yasar A. Ozcan

7. PERT/CPM • Program Evaluation and Review Technique (PERT) and the Critical Path Method (CPM) are tools for planning and coordinating large projects • Using PERT/CPM managers can obtain: • A graphical display of project activities • An estimate of how long the project will take • An indication of which activities are the most critical to timely project completion • An indication of how long any activity can be delayed without lengthening the project. Yasar A. Ozcan

8. Activity Precedence Relationships Yasar A. Ozcan

9. The Network (precedence) Diagram The network diagram is a diagram of project activities that shows the sequential relationships by use of arrows and nodes. NODE ARROW Yasar A. Ozcan

10. Figure 13.1 Network Representations Activity A a) Activity C Activity B Activity on Arc Activity on Node Dummy Activity A Activity A C c) b) Activity B Activity C B Yasar A. Ozcan

11. The Network Diagram, cont.A glossary of terms • Activity-on-Arrow (A-O-A). Network convention in which arrows designate activities. • Activity-on-Node (A-O-N). Network convention in which nodes designate activities. • Activities.Project steps that consume resources and/or time • Events.The starting and finishing of activities, designated by nodes in the A-O-A convention. • Path.A sequence of activities that leads from the starting node to the finishing node. Yasar A. Ozcan

12. The Network Diagram, cont.A glossary of terms Critical Path. The longest path equaling the expected project duration. Critical Activities. All the activities on the critical path. Slack.Allowable slippage (time) for a path; the difference between the length of a path and the length of the critical path. ES, EF, LS, LF.E (earliest); L (latest); S (start); F (finish) times of each activity. Yasar A. Ozcan

13. Figure 13.3 Activity Start and Finish Times ES LS Activity Name LF EF Yasar A. Ozcan

14. Critical Path Method (CPM) Figure 13.2 AON Network Diagram for Radiation Oncology A D F Start C H End B E G Yasar A. Ozcan

15. Critical Path Method (CPM) Path Lengths for the Radiation Oncology Project Yasar A. Ozcan

16. Time Estimates • Deterministic Time Estimates--estimates for each activity are fairly certain. • Probabilistic Time Estimates-- estimates for each activity are subject to variation. • Optimistic Estimate-- Length of time required under optimum conditions (o). • Pessimistic Estimate-- length of time required under worst conditions (p). • Most likely time estimate-- the most probable length of time required (m). • Beta Distribution-- A distribution which describes the inherent variability in the time estimates. Yasar A. Ozcan

17. Beta Distribution Mean Variance Path Standard Deviation Mean tpath = Σte path = Assumption: path duration times are independent of each other; requiring that activity times be independent, and that each activity is on only one path. Invoke Central Limit Theorem to use normal distribution. Yasar A. Ozcan

18. Probabilistic Time Estimates, cont. The Normal Distribution: Yasar A. Ozcan

19. Example 13.1 In planning for a new radiation oncology clinic, project managers determined that due to the nature of some of the activities, time estimates vary. After consulting with experts in each of the activity areas, they have calculated the optimistic, pessimistic and most likely time estimates, in weeks, as shown in Table below: Yasar A. Ozcan

20. Table 13.4 Calculation of Expected Time and Standard Deviations on Each Path for the Radiation Oncology Project Table 13.4 Calculation of Expected Time and Standard Deviations on Each Path for the Radiation Oncology Project Yasar A. Ozcan

21. Table 13.5 Path Completion Probabilities Yasar A. Ozcan

22. Figure 13.6 Project Completion Probabilities by the Specified Time 84% 50% te ts Weeks (1σ = 5) 69 64 z 0 1 2 2.5 Yasar A. Ozcan

23. Figure 13.5 Completion Probabilities for 65 Weeks p=.9082 5) BCDFH 57.7 6) BCDGH p=.7881 60.7 7) BCEFH p=.7852 61 8) BCEGH p=.5793 64 Completion time in weeks Yasar A. Ozcan 58606164 65

24. Path Completion Probabilities The last step in the analysis is the computation of joint probability, that is, we are interested in the joint effect of all the paths on the completion of the project. This is a simple multiplication of the completion probabilities of the significant paths (paths 5 through 8). The probability of completion of this project within 65 weeks is: P (completion by 65th week) = .9082 * .7881 * .7852 * .5793 = .3255 or 32.5%. Similarly, one can compute the probability of completion for other target days such as 66, 67 and 70 weeks. P (completion by 66th week) = .9345 * .8365 * .8389 * .6700 = .4394 or 43.9%. P (completion by 67th week) = .9545 * .8770 * .8830 * .7486 =.5533 or 55.3%. P (completion by 70th week) = .9871 * .9573 * .9625 * .8869 =.8066 or 80.7%. Yasar A. Ozcan

25. Table 13.6 Path Completion Probabilities Yasar A. Ozcan

26. Project Compression: Trade-Offs Between Reduced Project Time and Cost • In order to crash, need information on: • Regular time and crash time estimates for each activity. • Regular costs and crash cost estimates for each activity. • A list of activities that are on the critical path. Crash only those activities that are on the critical path to obtain reduction on project completion time. Yasar A. Ozcan

27. Figure 13.10 Project Duration and Compression (Crashing) Costs Total cost (TC) Minimum TC Cost Overhead and indirect costs Cumulative (direct) cost of compression Compression of time (crashing) Optimal solution Maximum compression time Minimum compression or normal finish time Yasar A. Ozcan

28. Example 13.2: The indirect costs for design and implementation of a new health information system project are $8,000 per week. The project activities (A through I), their normal durations and compressed durations, and also the direct compression, or crashing, costs are shown in Figure 13.7. Find optimal earlier project completion time. Yasar A. Ozcan

29. Figure 13.11 Project Compression C D F Finish H I Start B A E G Yasar A. Ozcan

30. Solution We apply the algorithm shown earlier to this example in successive iterations to find the solution for the optimal earlier project completion time. Iteration 1 Step 1: There are three paths. Adding the times of the activities, we obtain the path times. Since ABEGHI is the longest time path, with 203 days, it is the critical path. Since activity G is not available for compression, it is not shown in the rankings. Among the remaining activities on the critical path, activity E has the lowest compression cost, and thus it is selected for time reduction. Yasar A. Ozcan

31. Solution Iteration 1 Step 2: Rank critical activities according to their costs. Step 3: Since we can reduce this activity by two days, the new completion time considered for the project becomes (203-2 = 201) 201 days. Step 4: The cost of compression for two days for activity E is 2 * $7,000 = $14,000. The indirect project cost for 201 days @ $8,000 per day amounts to $1,608,000 (201*8,000 = $1,608,000). The total cost for 201 days then is equivalent to $1,622,000 (14,000 + 1,608,000). Step 5: Without compressing the project, we would incur only the indirect costs, which would be for 203 days without the time reduction. The total cost for 203 days then would be $1,624,000 (203 * $8,000). Comparing that to the total cost for 201 days (see step 4): $1,624,000 to $1,622,000, we observe a decrease. Thus we can continue compressing the project. Yasar A. Ozcan

32. Solution Iteration 2 Step 1: After compression of two days in iteration 1, among the three paths we now have two paths with equivalent path times. Both ABDFHI and ABEGHI are the longest paths, with 201 days; thus both are critical paths. Step 2: Rank critical activities according to their costs. Yasar A. Ozcan

33. Iteration 2 Now we are considering critical activities from both paths simultaneously. In the ABEGHI path, we have exhausted compression time for activity E; hence it is no longer available for compression and is not shown in the rankings. Among the remaining activities on both critical paths, the activity B has the lowest compression cost, so it is selected for time reduction. Step 3: Since we can reduce activity B by only one day, the new completion time to consider for the project becomes 200 (201-1) days. Step 4: The cost of compression for activity B for one day is 1 * $8,000 = $8,000. The indirect cost for the project for 200 days @ $8,000 per day amounts to $1,600,000 (200*8,000 = $1,600,000). The total cost for 200 days, then, is equivalent to $1,622,000 (14,000 + 8,000+ 1,600,000). Please note that the direct compression costs should be added in cumulatively; that is, for all 3 days of compression the project incurred $22,000 (14,000 + 8,000). Step 5: From iteration 1, the total cost for 201 days was $1,622,000. Comparing that to the total cost for 200 days (see step 4): $1,622,000 to $1,622,000, we observe no change. Thus we can still continue compressing the project. Yasar A. Ozcan

34. Solution Iteration 3 Step 1: After compression by one day in iteration 2, of the three paths we still have two paths, ABDFHI and ABEGHI, with 200 days each; both are critical paths. Step 1: After compression by one day in iteration 2, of the three paths we still have two paths, ABDFHI and ABEGHI, with 200 days each; both are critical paths. Step 2: Rank critical activities according to their costs. Step 5: cost is $1,625,000; hence stop compression. Yasar A. Ozcan

35. Figure 13.12 Total Cost of Compression Yasar A. Ozcan

36. Project management Software • CA Super Project • Harvard Total Manager • MS Project • Sure Track Project Manager • Time Line Yasar A. Ozcan

37. Advantages of PM Software • Imposes a methodology • Provides logical planning structure • Enhances team communication • Flag constraint violations • Automatic report formats • Multiple levels of reports • Enables what-if scenarios • Generates various chart types Yasar A. Ozcan

38. Applications • Clinical Health Applications (Clinical Paths) • Administrative Applications Yasar A. Ozcan

39. The End Yasar A. Ozcan