Chapter 6:

Managing Process Improvement

Projects

Copyright 2013 John Wiley & Sons, Inc.

Overview

6-2

Dcor Cabinets
Dcor Cabinets adopted a goal of 100 percent
on time delivery
Long-term customer loyalty
Enhance profitability

Having clear objective helped them assemble a

project portfolio focused on that goal
Meant declining some seemingly profitable
project ideas

6-3

Big Dig

Bostons Big Dig highway/tunnel project is

one of the largest, most complex, and
technologically challenging highway projects
Original cost estimate was $3 billion
Final cost was over $14 billion
1. Major underestimate of initial scope
2. Lack of cost control

Estimated benefit is $500 million per year

Expected to have a 78 year payback
6-4

Mississippi Power and Hurricane

Katrina
Primary and secondary storm center knocked
out
Third location had no electricity or running
water
Within days, had 11,000 repairmen
Needed housing, beds, food, water, 5,000
trucks, 140,000 gallons of fuel a day, 8,000
tetanus shots and much more
Directing was a massive project
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Introduction
Project management concerned with
managing organizational activities
Often used to integrate and coordinate
diverse activities
Projects are special types of processes

6-6

Defining a Project
Projects are a special type of process
Projects are a set of activities that, taken
together, produce a valued output
Each project is unique with a clear beginning
and end
They are performed infrequently and ad hoc,
with a clear specification of the desired
objective
Limited budget
Extremely important to the organization
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Examples of Projects
Constructing highways, bridges, tunnels and
dams
Building ships, planes, rockets, or a doghouse
Erecting skyscrapers, steel mills, and homes
Locating and laying out amusement parks,
camping grounds, and refuges
Organizing conferences and conventions
Managing R&D projects
Running political campaigns, war operations,
and advertising campaigns
6-8

Reasons for Growth in

Project Operations
1.
2.
3.
4.
5.
6.
7.

More Sophisticated Technology

Better-Educated Citizens
More Leisure Time
Increased Accountability
Higher Productivity
Faster Response to Customers
Greater customization for customers
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Planning the Project

Planning is probably the single most
important element in the success of the
project
Will discuss:
Project portfolio
Project team
Actual project planning tools

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The Project Portfolio

Long-term purpose of projects is to
achieve the organizations goals
Accomplished through the project
portfolio
Also know as the aggregate project plan

It is vital to consider the interactions

among various projects
Must manage projects as a set
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Four Categories of Project

1. Derivative projects

Seek to make incremental improvements in the

output and/or process

2. Breakthrough projects

Seek the development of a new generation of

outputs

3. Platform projects

Fall between derivative and breakthrough projects

4. R&D projects

Entail working with basic technology to develop

new knowledge
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The Aggregate Project Plan

Figure 6.1

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An Example of Aggregate
Project Plan

Figure 6.2

6-14

The Project Life Cycle

Project progress is rarely uniform
Tend to be either stretched or
exponential
With stretched, the project starts slow
but gathers speed during implementation
With exponential, there is continuous
activity but no output until everything
comes together
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Two Project Life Cycles (a)

Stretched-S and (b) Exponential

Figure 6.3

6-16

Projects in the Organizational

Structure
In a functional organization, projects are
frequently housed in the department with a
major interest in its success
More generic projects might report to a vice
president

Some organizations are structured by projects

Called projectized organizations

Some firms use a matrix structure to get the

benefits of both structures
6-17

Organizing the Project Team

A team is required to run a project
Some team members report directly to the
project manager
Those having long-term relationship with project
Those needing to communicate closely with project
manager
Those with necessary skills

Not common for project manager to have

reward authority
6-18

Four Major Attributes for Project

Managers
1. Credibility
2. Sensitivity

To both politics and personalities

3. Leadership, ethics, and managerial

style
4. Ability to handle stress

6-19

Project Plans
Initiation of a project should include the
development of a project charter
Also known as the project plan

Elements form the basis for more detailed

planning

Budgets
Schedules
Work plan
General management
6-20

Elements of Project Charter

Overview
A short summary of what the client expects from the
project

Goals, or scope
Contains a more detailed statement of the general
goals

Business case
Describes the justification for the project

General approach
Describes both the managerial and the technical
approaches
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Elements of Project Charter (Continued)

Contractual Aspects
Includes a complete list and description of all
reporting requirements, customer-supplied
resources, liaison arrangements, and so on

Schedule and milestones

This outlines the schedule and lists milestone
events

Resources
The project budget and cost
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Elements of Project Charter (Continued)

Personnel
The project team, approvers, and other involved
departments

Risk management plan

This covers potential problems that could affect the
project

Evaluation method
Every project should be evaluated against
standards
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Three Project Objectives

Figure 6.4

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Work Breakdown Structure

Figure 6.5

6-25

Project Baseline Schedule

Figure 6.6

6-26

Complexity of Scheduling
Project Activities
1. Large number of activities
2. Precedence relationships
3. Limited time of the project

6-27

Tasks Involved in Planning and

Scheduling Projects
Planning
Determining what must be done and which tasks
must precede others

Scheduling
Determining when the tasks must be completed
When they can and when they must be started
Which tasks are critical to the timely completion of
the project
Which tasks have slack and how much
6-28

Scheduling the Project

Schedule based on activities that must be
conducted to achieve the project goals
The Length of time each activity
requires
Order in which they must be completed

6-29

Terminology
Activity
One of the project operations

Event
Completion of an activity

Network
Set of all project activities shown
graphically
6-30

Terminology (Continued)
Path
A series of connected activities from start to
end

Critical path
Any path that delayed will delay project

Critical activities
The activities on the critical path
6-31

Project Scheduling with Certain

Activity Times
Inputs
List of the activities that must be completed
Activity completion times
Activity precedence relationships

Outputs

Graphical representation of entire project

Time to complete
Critical path or paths with critical activities
Slack time
Early and late start/end times
6-32

Data for a Mortgage Refinancing

Project

Figure 6.1

6-33

Network Diagram for Process

Improvement Project

Figure 6.8

6-34

Activity Slack Time

TES = earliest start time for activity
TLS = latest start time for activity
TEF = earliest finish time for activity
TLF = latest finish time for activity
Activity Slack = TLS - TES = TLF - TEF

6-35

Project Scheduling with Uncertain

Activity Times
Inputs
Optimistic (to), most likely (tm), and pessimistic (tp)
time estimate for each activity
Activity precedence relationships

Outputs

Graphical representation of project

Expected activity and path completion times
Variance of activity and path completion times
Probability project completed by specified time
6-36

Expected Activity Time and

Variance of Activity Time
te

t o 4t m t p
6

t p to

6-37

Six Sigma Activity Times

Table 6.2

6-38

Probability of Project Being

Completed on or Before Time 23

Figure 6.9

6-39

Simulating Project Completion

Times

Figure 6.10

6-40

Spreadsheet for Simulating

The Network

Figure 6.11

6-41

Simulation Results

Figure 6.12

6-42

Project Management Software

Capabilities
A wide range of software packages are
available
Selection depends on project needs and
cost
Bigger projects need more powerful
software
More powerful software takes longer to
learn
6-43

Microsoft Projects Gantt Chart

Figure 6.13

6-44

PERT Chart Generated by

Microsoft Project

Figure 6.14

6-45

Calendar of Activities Created

by Microsoft Project

Figure 6.15

6-46

Goldratts Critical Chain

In Critical Chain, Eliyahu Goldratt applies

his theory of constraints to project
management
He focuses on three phenomena that bias
completion times:
1.
2.
3.

Inflated activity time estimates

Activity time variability with path
interdependencies
Resource dependence

Slide on each of these

6-47

Inflated Activity Time Estimates

Workers inflate time estimates

Inflated time estimates tend to create
even more problems
1. Inflating the time estimate has no impact
on the actual probability distribution
2. Workers remain silent when finish early
3. Work tends to fill available time
4. Workers may delay start of activity
6-48

Activity Time Variability with

Path Interdependencies
With random shocks and series
activities, early completions offset late
completions
With random shocks and parallel
activities, early completions cannot
offset late completions
Most projects a combination of these
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Resource Dependence
Some activities need the same scarce
resource
If this happens, then one activity must
wait
As a result, resource dependency can
seriously delay a project

6-50

Goldratts Approach
The amount of safety time needed for the
critical path is less than the sum of the
individual safety times
Same idea as with inventory

Goldratt suggests reducing activity safety time

and using some fraction as a project buffer
Treats longest chain of consecutively
dependent tasks as the critical chain

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Project and Feeder Buffers

Figure 6.16

6-52

Controlling the Project: Earned

Value
One common control system for projects
is the cost variance report
Cost standards are determined through
engineering estimates
They become the target cost

Actual costs are then monitored

Feedback is provided to the project
manager
6-53

Cost-Schedule Reconciliation
Charts

Figure 6.17

6-54

Earned Value Chart

Figure 6.18

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