Project Management Ninja

Quantitative Methods

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Some Definitions To Know

Mean, Median and Mode
These measures provide values around which the data
tends to congregate.
Also called the measures of Central Tendency.

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Some Definitions To Know

Mean / Average
The mean is the sum of measurements divided by the
number of measurements. Also called simple mean.

Weighted Mean / Weighted Average

When some measurements are awarded weight of
importance (weight X Value) than your denominator is
nothing but the sum of all weights. See PERT Formula.

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Some Definitions To Know

Median
The median is the value having as many observations
above it as there are below it, when the observations are
arranged in an increasing or decreasing sequence of
values. The median is denoted by M or Md.
If an even no. of observations is collected from the process,
then the median is the mean of the two observations in
the middle, when the observations are arranged in the
increasing or decreasing sequence of values.
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Some Definitions To Know

Mode
The mode is the most frequently occurring observation in
the data set under consideration. The mode can be
denoted by Mo.
If the observation data has two modes, than the data are
said to have a Bi-modal distribution.
If the observation data has more than two modes then the
mod is no longer a viable measure of central tendency.
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Some Definitions To Know

Measures Of Variability (Dispersion or Variation)
Range
The range is the difference between the largest and the smallest
measurement. The range is denoted by R or r.

Variance
The population or process variance of N measurements is the
sum of squared deviations from the mean divided by N.

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Some Definitions To Know

Normal Distribution
Indicates that a process has many observations around its mean and
fewer and fewer as we get further and further away from the mean.
It indicates that about 68% of the observations in a process are
within one standard deviation (one Sigma) in each direction from
the mean, about 95% of the observations in a process would be
within two standard deviations (two Sigma) and about 99.7% of
the observations in a process would be within three standard
deviations (three Sigma) in each direction from the mean.

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Some Definitions To Know

Normal Distribution

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Some Definitions To Know

Mutually Exclusive
In probability theory, events E1, E2, ..., En are said to be mutually exclusive if the occurrence
of any one of them automatically implies the non-occurrence of the remaining n 1
events. Therefore, two mutually exclusive events cannot both occur.

Statistically Independent
two events are independent, intuitively means that the occurrence of one event makes it
neither more nor less probable that the other occurs. For example:
* The event of getting a 6 the first time a die is rolled and the event of getting a 6 the
second time are independent.
* By contrast, the event of getting a 6 the first time a die is rolled and the event that the
sum of the numbers seen on the first and second trials is 8 are dependent.
* If two cards are drawn with replacement from a deck of cards, the event of drawing a red
card on the first trial and that of drawing a red card on the second trial are independent.
* By contrast, if two cards are drawn without replacement from a deck of cards, the event
of drawing a red card on the first trial and that of drawing a red card on the second trial
are dependent.

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Some Definitions To Know

Decision Trees
Decision trees are used to facilitate selection among alternative
future decisions. In a decision tree, each decision is represented
by a square, each event is represented by a circle or a point, and
each outcome is represented by a branch.
The probability of each outcome, and its value or cost are shown
alongside its respective branch.

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Some Definitions To Know

Decision Trees
Three Months Late 50%

-200,000
-90,000

Vendor A Low But Risky

-110,000

0
-110,000

On-Time Completion 50%

Which
Contractor
To Use?

One Month Late

10%

-140,000

-170,000
-30,000

Vendor B High

0
-140,000
On-Time Completion 90%

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Some Definitions To Know

Histogram
Histogram is a bar chart against a frequency of time.
Its a graphical representation of the frequency distribution of the
variable under consideration. The histogram is usually used to
represent variable data. Values of the variable are usually grouped
into intervals and shown on the horizontal axis. The frequencies of
occurrence of values in various intervals are shown on the vertical
axis.

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Some Definitions To Know

Pareto Analysis
The pareto analysis allows the differentiation between the vital few
and the useful many causes of quality problems. It is also referred
to as the 80:20 rule.
A pareto chart shows various causes of the quality problem under
consideration in order of frequency. The cumulative frequency
curve can be shown on the pareto chart, using the same scale or a
different scale as the frequency on the vertical axis.

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Some Definitions To Know

Pareto Analysis

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Some Definitions To Know

Cause and Effect Diagram

The cause and effect diagram relates the effect or the quality problem
to its possible causes. It is used to summarize the results of
brainstorming sessions and to focus the search for the root
cause(s) of the quality problems. The cause and effect diagram
allows various potential causes of the quality problem being
studied to be grouped under selected major categories.
This is also known as: 1. Fishbone Diagram
2. Ishikawa Diagram

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Some Definitions To Know

Cause and Effect Diagram

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Some Definitions To Know

Scatter Diagram
The scatter diagram enhances the understanding of the type and
strength of relationship between two variables. The vertical axis, or
Y-axis shows the values of one variable, and the horizontal axis or
X-axis, shows the corresponding values of the variable.
Basically it shows on one single chart the relationship between two
variables and the effect of one on another based on changing one.
E.g. By increasing the salary is there any effect on the attrition levels.

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Some Definitions To Know

Scatter Diagram

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Some Definitions To Know

Control Charts
The control chart provides a view of the process characteristic of
interest over time.
This is the only way to fully analyze the health of a quality process. If
the process is in control or is out of control or even if its consistent
or in-consistent.

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Some Definitions To Know

Control Charts

Upper Specification Limits

Upper Control Limit

Lower Control Limit

Lower Specification Limits

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Some Definitions To Know

Control Charts

Rule Of Seven

Rule Of Seven

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Some Definitions To Know

Control Charts

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Some Definitions To Know

The Six Sigma
The Six Sigma method is an overall management approach for
business systems improvement.
It has some thresholds against which organizations first assess their
individual process capability i.e., where they stand as of today.
And than embark upon a six Sigma project to take their process
capability from where it is today to one of the bench marks of the
six sigma.
This is usually called a Six Sigma Project.

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Some Definitions To Know

Six Sigma Thresholds

+ / - 1 Sigma = 68.26%
+ / - 2 Sigma = 95.46%
+ / - 3 Sigma = 99.73%
+ / - 6 Sigma = 99.99%
If your process was working at Six Sigma than it
would have only 3.4 defects per 1 Million
opportunities.
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Some Definitions To Know

Six Sigma Projects

Six Sigma projects are known by several names based on the

duration and the complexity and the no. of parties involved.
Usually the are called:
1. White Belt For training people
2. Green Belt For a 4 6 Months duration
3. Black Belt For a complex long term project.
Please note that just because a company is doing a six sigma
project it would be called a Six Sigma Company.

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Some Definitions To Know

Six Sigma and Other Quality Things
The six sigma method can be summarized as under:
Six Sigma = Total Quality Management + Continuous Quality
Improvement + Stronger Customer Focus + Additional Data
Analysis Tools + Financial Results + Project Management
The Six Sigma Project Lifecycle is usually called the DMAIC or
D = Define, M = Measure, A = Analyze, I = Implement and C =
Control.

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Some Definitions To Know

Main Tools Of Six Sigma

1.

DFSS = Design For Six Sigma which helps provide a clear

understanding and documentation of requirements.
QFD = Quality Function Deployment, which helps the team to
systematically gather, prioritize and document customers needs,
requirements and preferences.
DOE = Design of Experiments, which provides specific
information about the response variable(s) of interest based on
changes in the levels of independent factors and interactions
among those factors, in the design experiment.
FMEA = Failure Mode And Effect Analysis, which helps identifyl
and qualify the major failure modes and their impact and give it a
quantitative value for proper measurements.

2.

3.

4.

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Some Definitions To Know

Depreciation

Depreciation allows the allocation of the cost of such assets to

expense over the useful life of these assets.
There are different kinds of depreciation: 1. Straight Line
A specific amount of depreciation is charge every single year.
2. Written Down Value (WDV)
A specific percentage is used for the depreciation but its charged
against the depreciated value of the article the previous year.
Thus each year the amount of depreciation is lesser and lesser.

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Some Definitions To Know

Present Value (PV)
The expected future cash flow of the investment are discounted at
the cost of the capital to the base year (present time) to obtain this
present value.

Net Present Value

Same as above + The initial cost of the investment is subtracted from
the Present Value to obtain this NPV.

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Some Definitions To Know

Internal Rate Of Return
The IRR is the interest rate or discount rate, that equates the present
value of the expected future net cash flows to the initial cost of the
investment. Alternatively, IRR can be defined as the interest rate
that causes the NPV of the investment to equal Zero.

Payback Period
The payback period is the time taken to recover the initial cost of the
investment. Projects with shorter payback periods are considered
more attractive than others. This definition is closely linked with the
concept of Break Even Analysis.

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Some Definitions To Know

Break Even Analysis (BEP)
This is the point where the revenue from the project is exactly the
same as the costs of the project. Beyond this point organization
accumulates profits as revenue is higher than costs.

Time taken to
achieve this break
even point is called
the Payback Period.

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Formulae That You Should Know

Channels Of Communications

N (N-1)
------------2

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Formulae That You Should Know

PERT Formula = 3 Point Estimate
P + 4M + O
=

---------------6

Standard Deviation

Feb 2013

Where
P = Pessimistic
M = Most Likely
And
O = Optimistic

PO
----------6
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Formulae That You Should Know

Earned Value Variance And Performance
Indicators
Name
Cost Variance
(CV)
Scheduel
Variance (SV)
Cost
Performance
Index (CPI)
Schedule
Performance
Index (SPI)

Feb 2013

Formula

Interpretation

EV - AC

Negative is Over budget.

EV - PV

Negative is Behind schedule

EV / AC

We are getting work worth $...for

every $ spent. Less than 0 shows we
are not efficient.

EV / PV

We are progressing only at the % of

the rate orignially planned.

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Formulae That You Should Know

Earned Value Forecasting Formulae
N am e

E s tim a te a t
C o m p le tio n
(E A C )

F o r m u la

W hen U sed

BAC / CPI

W h e n th e r e is n o v a ria n c e a n d th in g s
w ill c o n tin u e a t th e s a m e r a te .

AC + ETC

A c tu a l till d a te + a n e w e s tim a te fo r
re m a in in g w o r k .( w h e n O rig in a l
e s tim a te w a s fu n d a m e n ta lly fla w e d ) .

AC + B AC - EV

[AC + (BAC EV)] / [CPI X SPI]

[A C + (B A C - E V )] / C P I

E s tim a te T o
C o m p le tio n
(E T C )
V a r ia n c e A t
C o m p le tio n
(V A C )

Feb 2013

EAC - AC

B AC - EAC

A C + R e m a in in g b u d g e t. W h e n
c u r re n t v a r ia n c e a r e a ty p ic a l o f
fu tu re .
A c tu a l till d a te + R e m a in in g b u d g e t
d u ly m o d ifie d b y th e c u r re n t
p e rfo rm a n c e in d e x .
H o w m u c h m o re th e p ro je c t w ill
c o s t?
A t e n d o f p ro je c t w o u ld w e b u o v e r
b u d g e t o r o th e r w is e .

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Formulae That You Should Know

Float
= Late Start (LS) Early Start (ES)
Or
= Late Finish (LF) Early Finish (EF)

Duration
= Early Finish (EF) Early Start (ES)
or
= Late Finish (LF) Late Start (LS)
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Thats All Folks..

Best
Of
Luck.

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