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8773_C000.indd i 7/9/2007 11:41:05 AM
8773_C000.indd ii 7/9/2007 11:41:07 AM
8773_C000.indd iii 7/9/2007 11:41:07 AM
8773_C000.indd iv 7/9/2007 11:41:07 AM
 Dedication

Dedicated to the memory of Omolade Badiru

The bud that never got to bloom, but whose spirit lives on

8773_C000.indd v 7/9/2007 11:41:08 AM

 Contents
Preface ....................................................................................................................ix
Acknowledgments .................................................................................................xi
Authors ................................................................................................................ xiii
Chapter 1 Characteristics of Industrial Projects ...............................................1
Chapter 2 Principles of Project Management .................................................29
Chapter 3 Time and Schedule Management ...................................................67
Chapter 4 Project Duration Diagnostics .........................................................87
Chapter 5 Schedule Compression Techniques .............................................103
Chapter 6 Resource Analysis and Management ...........................................115
Chapter 7 Techniques for Project Forecasting .............................................145
Chapter 8 Six Sigma and Lean Project Management ...................................169
Chapter 9 Project Risk Analysis ...................................................................195
Chapter 10 Project Economic Analysis ...........................................................203
Chapter 11 Industrial Project Management Case Studies ...............................235
Appendix A Project Terms and Definitions ......................................................259
Appendix B Project Acronyms ........................................................................ 291
Index ................................................................................................................... 303

8773_C000.indd vii 7/9/2007 11:41:08 AM

 1 Characteristics of
Industrial Projects
IMPORTANCE OF INDUSTRIAL PROJECTS
Industry represents the pulse of economic development of any nation. The goods and
services provided by industry directly influence the social, political, economic, and
cultural structures of any population. Thus, successful industrial project management
holds a key position in advancing local, regional, and national development. A com-
munity that cannot institute and sustain industrial vitality will eventually become
politically delinquent and economically retarded. Project management is the process
of managing, allocating, and timing resources to achieve a given goal in an efficient
and expeditious manner. The intrinsic benefits of this definition are even more pro-
nounced in fast-paced and globally influenced industrial projects.

TIME–COST–RESULT GOALS OF INDUSTRY

The objectives that constitute industrial project goals may be in terms of time, costs,
or technical results. Projects can range from the very simple to the very complex.
Owing to its expanding utility and relevance, project management has emerged as a
separate body of knowledge that is embraced by various disciplines ranging from engi-
neering and business to social services. Project management techniques are widely
used in many endeavors, including construction management, banking, manufac-
turing, engineering management, marketing, health care delivery systems, transpor-
tation, research and development, defense, and public services. The application of
project management is particularly of high value in industrial enterprises. In today’s
fast-changing and highly competitive global market, every industrial enterprise is
constantly striving to get ahead. Integrative project management offers one avenue
to achieve that goal.

LASTING LEGACY OF PROJECT MANAGEMENT

Project management has had more direct impacts on human development than any
other single discipline of study in the history of the world. From the time of ancient
history and Mesopotamia’s early development to the modern times, acts of proj-
ect management have brought to bear on human accomplishments. Early examples
include the construction of Stonehenge in England, the erection of the Pyramids,
and the development of the notable Wonders of the World. The ancient projects using
gears and pulleys required extreme preparation, labor coordination, and cooperation.
Although there was no formal discipline of project management in those ancient
times, the processes of planning, organizing, scheduling, and control, no doubt, were

8773_C001.indd 1 7/9/2007 11:32:52 AM

 2 Industrial Project Management: Concepts, Tools, and Techniques

used in accomplishing those feats. In spite of its long-standing benefits, it was only
in the past few years that project management has emerged as a formal discipline;
and it is now being globally recognized. The Project Management Institute has an
envisioned goal that states, “Worldwide, organizations will embrace, value, and uti-
lize project management and attribute their success to it.” This vision is already
being broadly realized. This is evidenced by the rapid growth in project management
professional memberships around the world. Interest in the discipline is growing
rapidly around the world—in Europe, Asia, North America, South America, the Far
East, the Caribbean, Africa, and so on. There is no single country that can claim not
to be touched daily by the impact of project management processes.

ELEMENTS OF INDUSTRIAL OPERATIONS

Industrial development is one primary path to achieving national economic develop-
ment. So, industry is very vital to the development of any nation. Historical accounts
abound on how the industrial revolution had a profound effect on world development.
A sustainable industrial development can positively impact the political, economic,
cultural, and social balance in a community. In order to achieve and sustain industrial
development, both the technical and managerial aspects of industrial projects must
come into play. This book focuses on the integration of managerial approaches and
analytical techniques to improve the planning, scheduling, and execution of indus-
trial projects.
The primary goal of any industry is to plan operations ahead and allocate resources
appropriately to improve industrial project efficiency, effectiveness, and productivity
while reducing production waste (Lean) and improving product quality (Six Sigma).
Using a formal project management approach makes it possible to achieve this goal.
For projects to be effectively managed in an industrial system, managers and analysts
must understand the industrial operating environment. Any high-tech industrial proj-
ect is a complex undertaking that crosses diverse areas of endeavors. Both technical
and organizational issues must be addressed in order to avoid system-wide project
failures. This chapter covers the building blocks essential for the application of project
management to industrial operations. The contents of this and the subsequent chapters
will enable the project analyst to accomplish the following learning objectives:

• Understand the basic steps and components of project management.

• Learn best-practices approach to project planning, organizing, scheduling,
and control.
• Use case examples as the basis for understanding “what went wrong” and
how develop sustainable project solutions.
• Learn how to develop project scope and develop a project charter.
• Using planning as the roadmap toward project success.
• Create cohesive project teams using the Triple C model of communication,
cooperation, and coordination.
• Develop project work breakdown structure.
• Use a mix of qualitative and quantitative techniques to enhance project
management.

8773_C001.indd 2 7/9/2007 11:32:53 AM

 Characteristics of Industrial Projects 3

• Develop compromise or tradeoff strategies for cost, schedule, and

performance constraints.

Manufacturing is the process of creating a product by processing raw materials

from an initial point through to the end product. It encompasses several functions
that must be strategically planned, organized, scheduled, controlled, and terminated.
A manufacturing cycle includes such functions as forecasting, inventory control, pro-
cess planning, machine sequencing, quality control, decision analysis, production
planning, cost analysis, process control, facility layout, work analysis, and a host of
others. All of these are functions that fall within the process of planning, organizing,
scheduling, and control cycles of project management. Industrial projects can be
characterized by a combination of the following attributes:

• Large external stakeholders, customers, owners

• Internal stakeholders
• Short product life cycle (in high-tech industries)
• Variable investment sources
• Narrow margins for success.

As with all projects, industrial projects are subject to three basic constraints of time,
cost, and performance as illustrated in Figure 1.1. Any other constraint in the project
environment will somehow fall under one of these three constraints. Several factors
lurk behind the screen of the triple constraints. Issues such as workforce capability,
operating tools, and process structure impinge on the project’s ability to be delivered
on time, within budget, and in line with performance expectations.
Industrial operations are predicated on strategic operations, which utilize high-
tech tools, knowledge workers, and complex processes. Consequently, project man-
agement in an industrial operation implies the management of people, process, and
technology, as shown in Figure 1.2, to satisfy the triple constraints.
While the proliferation of technology in industry has led to a loss of jobs, it has also led
to the creation of new types of jobs, and so the coupling of technology and manufacturing
has spawned a need for retraining of workers and realignment of functions. Even though
high technology is sometimes blamed for stifling creativity and restricting traditional
personal workmanship, it has also been credited with fostering industrial innovation.

Triple constraints

Time (schedule expectations)

What is behind the
Cost (budget limitations) screen?

Performance (output targets)

FIGURE 1.1 Triple constraints on projects.

8773_C001.indd 3 7/9/2007 11:32:53 AM

 4 Industrial Project Management: Concepts, Tools, and Techniques

Project
management
(Areas of focus)

People Process Technology

FIGURE 1.2 Focus on people, process, and technology.

This requires new management approaches. Effectively managing industrial technology

requires project management skills on the part of management, employees, and
clients in order to ensure the successful design, development, production, transfer,
introduction, and implementation of various forms of technology to generate products
and or services. Innovative applications of new and existing management techniques
are needed to address the rapidly changing nature of industrial operations. Project
management approaches are at the forefront of such applications.

DEPENDENCY ON HUMAN CAPITAL

In spite of the increasing proliferation of automation in industry, human capital still
holds a major role in accomplishing industrial output. Investment in human resource
assets should be a primary focus of any organization’s project efforts. The success of
the Toyota production system is not due to any magical properties of the approach,
but rather due to the consistency, persistence, and dedication of the humans who
apply the Toyota approach to all their industrial projects. This cannot be achieved
without giving something (e.g., operator training, technology tools, and doable process)
to obtain desired outputs. Recalling the cliché of “nothing from nothing is nothing,”
as illustrated graphically in the following figure, industrial organizations should invest
in their human capital in order to maximize project output. Figure 1.3 shows the central
role of people in the various aspects of an industrial system.

Nothing – Nothing = Nothing

GLOBAL INDUSTRIAL COMPETITION

Many North American manufacturers cannot compete globally on the basis of labor
cost, where improvement efforts are often directed. The competitive advantage for

8773_C001.indd 4 7/9/2007 11:32:54 AM

 Characteristics of Industrial Projects 5

Employee Business Industry Corporate

programs strategies profile goals

Project Information
coordination services

Stockholder Industry
relations competition
Central role
of humans
Time Technology
management assessment

Quality Productivity
program improvement

Performance Industrial project Resource

specification management management

FIGURE 1.3 Role of human decisions in industrial projects.

many manufacturers will come from appropriate infusion of technology into the
manufacturing enterprise. Strategic research, development, and implementation of
technological innovations will give manufacturers the edge needed to successfully
compete globally. In spite of the many decades of lamenting about the future of man-
ufacturing, very little has been accomplished in terms of global competitiveness. Part
of the problem is the absence of a unified project management approach. Managing
global and distributed production teams requires a fundamental project approach.
One valid industrial proposition is the need to pursue more integrative linkages
of technical issues of production and the operational platforms available in industry.
Many concepts have been advanced on how to bridge the existing gaps. But what is
missing appears to be a pragmatic project-oriented road map that will create a uni-
fied goal that adequately, mutually, and concurrently addresses the profit-oriented
focus of practitioners in industry and the knowledge-oriented pursuits of researchers
in academia. The problems embody both scientific and management issues. Many
researchers have not spent adequate time in industry to fully appreciate the opera-
tional constraints of industry. Hence, there is often a disconnection between what
research dictates and what industry practice requires. An essential need is the devel-
opment of an industrial project road map. Two aspects that are frequently ignored in
industrial project implementations involve human factors and ergonomics parameters
of the work environment. A project management approach facilitates an appreciation
of this crucial component of industrial projects.

8773_C001.indd 5 7/9/2007 11:32:54 AM

 6 Industrial Project Management: Concepts, Tools, and Techniques

SYSTEM’S VIEW OF INDUSTRIAL PROJECTS

An industrial system is a collection of interrelated elements brought together to achieve
a specific objective of meeting product or service goals. In a management context, the
purposes of a system are to develop and manage operational procedures and to facili-
tate an effective decision-making process. A systems approach is particularly essential
for contemporary manufacturing because of the various factors that interact. Four of
the major desired characteristics of an industrial project system include:

1. Possession of a definite objective

2. Ability to interact with the environment
3. Ability to self-regulate
4. Ability to carry out self-adjustment.

The various elements (or subsystems) of a system act concurrently, in a separate

but interrelated fashion, to achieve the common goal. This synergism helps to expe-
dite the decision process and to enhance the effectiveness of decisions. The support-
ing commitments from other subsystems of the organization serve to counterbalance
the weaknesses of a given subsystem. Thus, the overall effectiveness of the system
will be greater than the sum of the individual efforts of the subsystems. The increas-
ing complexity and globalization of industrial operations make the systems approach
essential. The classic approach to the decision-making process follows rigid lines of
organizational charts. By contrast, the systems approach considers all the informa-
tion interactions necessary between the various elements of an organization. The
industrial system has shifted considerably over the past decades as illustrated in
Figure 1.4. The primary focus in the 1960s was on industrial efficiency. Today, we
are concerned not only with globality, but also with nanoscale industrial production;
and cyber-space consciousness is already making dominant inroads into every level
of project operations.

Industrial Project System Integration

Any project can be viewed as a system of operations and activities. There are several
major steps for successfully initiating, implementing, and managing a project system.
Some of the steps are summarized as follows:

1. Definition of Problem: Define the problem using keywords that signify

the importance of the problem to the overall organization. Prepare and
announce the project scope and plan.
2. Assignment of Personnel: The project group and the respective tasks and
responsibilities should be explicitly established.
3. Initiation of the Project: Arrange organizational meetings and project
kickoff, during which a general approach to the project is announced.
4. Development of System Prototype: If applicable, develop a prototype
system, test it, and learn more about the problem from the test results.

8773_C001.indd 6 7/9/2007 11:32:55 AM

 Characteristics of Industrial Projects 7

1960s 1970s 1980s 1990s 2000s 2010s

Efficiency Efficiency Efficiency Efficiency Efficiency Efficiency

Quality Quality Quality Quality Quality

Flexibility Flexibility Flexibility Flexibility

Environment Environment Environment

Globality Globality

Nanolity

Cyber-space consciousness

FIGURE 1.4 Evolution of industrial systems performance.

5. Full-System Development: Expand the prototype to a full system, evaluate the

user interface, and incorporate user training facilities and documentation.
6. System Verification: Get experts and potential users involved, ensure that
the system performs as designed, and debug the system as needed.
7. System Validation: Ensure that the system yields expected outputs. Validate
the system by evaluating performance level.
8. System Integration: Implement the full system as planned, ensure the sys-
tem can coexist with systems already in operation, and arrange for tech-
nology transfer to other projects.
9. System Maintenance: Arrange for continuing maintenance of the system.
Update project system procedures as new information becomes available.
10. Documentation: Prepare disseminate documentation of system.

With increasing shortages of resources, more emphasis is placed on the sharing

of resources, both physical and intellectual. It is through the integration of indus-
trial systems that resource sharing may be most efficiently achieved. Systems inte-
gration may involve the physical integration of technical components, the objective
integration of operations, the conceptual integration of management processes, or
a combination of these. Systems integration involves the linking of components to
form subsystems and the linking of subsystems to form composite systems within
a single organization or across several organizations. Such integration facilitates the
coordination of diverse technical and managerial efforts to enhance organizational

8773_C001.indd 7 7/9/2007 11:32:55 AM

 8 Industrial Project Management: Concepts, Tools, and Techniques

functions, reduce cost, save energy, improve productivity, and maximize the utilization
of resources. Because information and other resources are shared, it helps to ensure
that components and subsystems operate synergistically to optimize the performance
of the total system. Some important benefits of systems integration are as follows:

1. Multiuser Integration: This involves the use of a single component by

separate subsystems to reduce both the initial cost and the operating cost
during project life cycle.
2. Resource Coordination: This involves integrating the resource flows of
two normally separate subsystems so that the flow of resources from one
subsystem to the other minimizes the total resource requirements.
3. Functional Integration: This involves the restructuring of functions and
the reintegration of subsystems to optimize costs when a new subsystem
is introduced.

Resource Sharing for Systems Integration

Systems integration should cover both machines and people. Just as with physical
systems, the supporting cooperative actions of personnel subsystems serve to coun-
terbalance the weaknesses at certain points in the organization. The following is a
representative list of possible subsystems. Figure 1.5 shows resource sharing plays a
central role in project systems.

• Management
• Manufacturing
• Quality information
• Financial information
• Marketing information
• Inventory information
• Personnel information
• Production information
• Design and engineering
• Research and development
• Management information.

Resource Project system

sharing integration

Project data Performance Outcome

tracking assessment

FIGURE 1.5 Resource-sharing linkages in project system.

8773_C001.indd 8 7/9/2007 11:32:55 AM

 Characteristics of Industrial Projects 9

Business Process Reengineering

Business process reengineering (BPR) is the redesign of business work processes
and the implementation of the new design. This has emerged in recent years as a
way to manage manufacturing functions. BPR calls for changes at three levels of the
organization:

1. Enterprise-wide changes (driven by management initiatives)

2. Process-level improvement changes (driven by project teams)
3. Task-level changes (driven by individual workers).

Improvement in personnel skills and functions, technology, and in the process

itself all contribute to the achievement of business process improvement. The factors
that drive BPR are the needs for efficiency, quality, flexibility, and competitiveness.
Traditional industrial processes operate in “blobs” (blurb) as depicted in Figure 1.6,
whereby tasks are executed along fuzzy lines of responsibility. Although inputs and
outputs may be lineated, within-the-box operations are often not easily tractable.
An alternative is to use a project system point-to-point lines of operations control
as shown in Figure 1.7. Process inputs are clearly identifiable, the integrated outputs
are observable, and the internal operations are clearly traceable. This has the advan-
tage of the ability to trace points and sources of project problems.

CONTINUOUS PATHS OF IMPROVEMENT

If a traditional approach to industrial process improvement is followed, as shown in
Figure 1.8, then alternate cycles of process improvement and degradation occur. This
impedes overall potential to achieve the target. As an alternative, it is recommended

Inputs Result
Blobs

FIGURE 1.6 Traditional blobs of operation.

Process inputs Integrated output

Point-to-point
performance review

FIGURE 1.7 Point-to-point network of industrial tasks.

8773_C001.indd 9 7/9/2007 11:32:56 AM

 10 Industrial Project Management: Concepts, Tools, and Techniques

Points of drastic
improvement action
Target level
Interval of
degradation
Quality deficiency
Quality

Level achieved
Net improvement
Initial level
Lower control limit

0 t1 t2 t3 t4 T
Time

FIGURE 1.8 Undesirable traditional process improvement approach.

Path of
continuous improvement

Target level

Total improvement
Quality

Initial level

0 T
Time

FIGURE 1.9 Desirable approach to industrial process improvement.

that industrial process improvement be pursued through incremental steps as

depicted in Figure 1.9, whereby a continuous path is charted from the starting
point to the target point. This has the advantage of lower cost, smoother operations,
and greater potential to achieve production goals.

INDUSTRIAL PRODUCTION PLANNING

Production planning is the process of coordinating activities to get raw material stage
to the finished-goods stage. It is the function of making sure that new designs are
added as new products while old products are modified or discontinued. It involves

8773_C001.indd 10 7/9/2007 11:32:57 AM

 Characteristics of Industrial Projects 11

setting up production objectives, allocating resources, and establishing standards and

procedures to govern the production environment. The production-planning function
is an iterative process that is reviewed and revised based on the state of the system.
Some of the production tasks that may need to be coordinated as project activities
include:

1. Materials and Supplies: Generation of reports showing materials and sup-

plies assigned to and used by each production center.
2. Labor Requirements: Analysis of labor hours required for production
operations.
3. Overhead Allocation: The distribution of overhead to production centers.
An analysis is made of overhead allocated and overhead actually incurred
for specific jobs.
4. Job Control: Tracking of job status and milestones.
5. Job Transfer: Routing of a job from one production center to another.
6. Supply and Demand Trending: Seasonality of certain products.
7. Inventory Management: Tracking of physical assets and resources of the
organization.

PROJECT MODEL OF INDUSTRIAL PRODUCTION

The manufacturing enterprise is a project consisting of distinct production activities.
In a large organization, the industrial system may be configured as a multiproject
endeavor, and the components of the project may be managed as any conventional
project. Figure 1.10 shows the typical components of an industrial enterprise
organized as a project network of industrial.

Market Systems
survey integration

Process
planning
Quality specs

Feasibility
Idea study Design Financing Training Production

Costing Operations planning Schedule

Facilities

Technology assessment

FIGURE 1.10 Manufacturing project network.

8773_C001.indd 11 7/9/2007 11:32:57 AM

 12 Industrial Project Management: Concepts, Tools, and Techniques

The industrial network starts with the conceptualization of a product. Some of

the distinct tasks required for getting the product from the idea stage to the market
include the following:

1. Feasibility Study: A study conducted to ascertain the practicality of the

proposed product. The practicality is considered in terms of available tech-
nology, cost constraints, production process, labor skills availability, orga-
nizational goals, and market structure.
2. Market Survey: An analysis of what the market wants in terms of cost,
product functionality, and comparative manufacturer reliability.
3. Cost Estimation: Development of cost figures for the various physical and
qualitative components that go into obtaining the final product. These may
include machines, inventory space, training, raw materials, transportation,
advertising, design, customer service, labor wages, and so on.
4. Technology Assessment: An assessment of the current technological capa-
bilities. This may involve questions such as: Is the technology proven and
stable enough to sustain production operations? Is the technology affordable?
What will be the impact of technology changes on production?
5. Product Design and Development: The development of a full-fledged
design of the product based on the outcomes of the preceding tasks.
Adaptability should be incorporated into the design so that future product
changes can easily be accomplished as the technology changes.
6. Financing: The process of obtaining funds to complete the manufacturing
project. Sources of funds may include top management (internal funding),
external sponsors (e.g., government-backed projects), or contract awards
(e.g., client-sponsored products). If the preceding tasks of feasibility study,
market survey, cost estimation, and technology assessment are done with
proper attention to details, the task of obtaining funds will be simplified.
7. Process Planning: The development of a plan for the manufacturing pro-
cess, taking into consideration machines, tools, layouts, and raw materi-
als. The level of process sophistication depends on the designed product
configuration and availability of funds.
8. Quality Specification: The development of product quality specifications
based on product functions and process capability. A process capability
analysis may be very helpful in this task because a process capability
analysis will determine the tolerance that a process can handle if it is sta-
tistically in control. The process, in this case, is a unique combination of
machines, tools, methods, materials, and labor skills.
9. Personnel Assignment and Training: At this stage, the required person-
nel are acquired, either through new hires or the transfer of employees,
who may be able to bring previous experience to the new product setup.
Training is conducted in accordance with process requirements.
10. Operations Planning: The development of operational flow charts, raw-
material requirements, production rates, maintenance schedules, input/
output flows, operating costs, overhead allocation, job routing forms, capacity
plans, shift schedules, operations sequences, labor classifications, space
requirements, deadlines, and production standards.

8773_C001.indd 12 7/9/2007 11:32:58 AM

 Characteristics of Industrial Projects 13

11. Facilities Layout: Setup of the physical structure or the production line.
It may involve the relay out of the existing facility, the installation of new
equipment, or the construction of new structures.
12. System Integration: Coordinating the new production line to coexist with
other lines within the manufacturing system. It may require schedule
adjustments to satisfy shared-resource requirements, the development of
policies to accommodate product integration, or a realignment of manage-
rial responsibilities.
13. Production Scheduling: The generation of schedules of the various activi-
ties in the production process. This covers machine assignments, labor
assignments, work releases, material supply, in-process storage, and time
standards.
14. Production Run: The actual implementation of the production schedule.
Production control functions may be incorporated into this task. Inspection
should be included in the task definitions under “production run” or may
be treated as a separate function.
15. Product Shipment: This is the final task to complete the project.

The tasks presented in the example may be treated in detail as a subproject of the
overall industrial project. In specific situations, some tasks may be added, combined,
eliminated, or defined in alternate terms.

INDUSTRIAL PROJECT INTERFACES

The interface between project management functions and the industrial enterprise
is easily observable throughout any organization. Many functions that directly or
indirectly support the industrial effort can best be managed using project manage-
ment concepts. Figure 1.11 shows a typical interface of project management in an
industrial organization.
Some of the specific tasks and issues to be addressed when managing industrial
projects are

• Project selection and prioritizing

• Resource requirements planning
• Cost estimation
• Team formation
• Facility design and management
• Project inventory analysis
• Project forecasting
• Activity modeling
• Human resource management
• Multiproject coordination
• Management of global interfaces
• Project economics
• Contract procurement.

All of these fall within the purview of a formal project management approach.

8773_C001.indd 13 7/9/2007 11:32:58 AM

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