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This video tutorial demonstrates how to create a PDM network diagram for a project, which is essentially a flow chart indicating activity dependencies. The project in this example consists of six activities, with A starting first, followed by B and C once A is completed. Subsequent activities can only begin once their preceding activities are finished. The process begins with sketching a rough flowchart starting with Activity A and then proceeding to Activities B and C once A is done. Continuing in this manner, the diagram is completed to reflect the sequence of activities in the project.