PM 0015 QUANTITATIVE METHODS IN PROJECT MANAGEMENT

Q1. In order to include the cost aspects in the project scheduling, it is very much necessary to first define the cost-duration relationships for various activities in the project. Discuss Project Cost.
The total project cost comprises direct and indirect costs. The direct costs are associated with the individual activities such as manpower loading, equipment utilized, materials consumed directly, etc., in respect of various activities. The indirect costs are those expenditures which can not be allocated to individual activities of the project. These may include administration or supervision costs, loss of revenue, fixed overheads etc. While the indirect costs allocated to a project goes up with the increase in project duration, direct costs go high as the time for individual activity is reduced. Such deliberate reduction of activity times by outing an extra effort is called crashing the activity.For technical reason, it may not be possible to indefinitely reduce the duration of an activity. The crash time represents the fully expedited or the minimum activity duration time that is possible, and any attempts to further crash would only raise the activity direct costs without reducing the time. The activity cost corresponding to the crash time is called the crash cost. The corresponding activity duration is known as the normal time. The direct cost-time relationship and indirect cost-time relationship are shown in Figure 4.1 and Figure 4.2 respectively below. From the figures it is evitable that the direct costs decreases with duration of time and finally saturates, but the indirect costs increases with passage of time.

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The point A above figure denotes the normal time for completion of an activity whereas point B denotes the crash time which indicates the least duration in which the particular activity can be completed. The cost curve is non-linear and asymptotic but for the sake of simplicity it can be approximated by a straight line with its slope given by Cost Slope = (Crash cost Normal cost)/(Normal time Crash time) The cost slope represents the rate of increase in the cost of performing the activity per unit decrease in time and is called the cost/time tradeoff. It varies from activity to activity. The total project cost is the sum total of the project direct and indirect costs. Figure shows the both the direct and the indirect project costs. As these two curves have been plotted against the same time scale, at each ordinate, the project direct and indirect costs can be added to obtain the various points on the graph, indicating the total project cost corresponding to the various project durations.

Q2. Describe the importance of business forecasting

Importance of Business Forecasting Because of the variation of the economic and business conditions over time, managers must find ways to keep abreast of the effects that such changes will have on their organizations. One technique which is very much useful in planning for the future needs is the forecasting. Although numerous forecasting methods have been devised, they all have one common goal to make predictions of the future events so that the projections can then be incorporated into the planning and strategy process. The need for forecasting encompasses the modern society. Forecasting is highly essential in our modern society to take necessary precautionary action. For example, officials in government must be able to forecast such things as unemployment, inflation, industrial production, and expected revenues from personal and corporate income taxes in order to

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formulate policies. Marketing executives of a large retailing corporation must be able to forecast product demand, sales revenues, consumer preferences, inventory and so on, in order to make timely decisions regarding current and future operations and to assist in strategic planning activities. Administrators of a college or university must make forecasts of student enrolments and consider the trends in curricula that are based on technological developments in order to plan for the construction, facilities and other needs. There are two common approaches to forecasting qualitative and quantitative. 1. Qualitative forecasting methods are especially important when historical data are unavailable. Qualitative forecasting methods are considered to be highly subjective and judgmental. Examples of qualitative forecasting methods are informed opinion and judgment based such as the Delphi method, market research, and historical lifecycle analogy. They are usually applied to intermediate- or long-range decisions. 2. Quantitative forecasting methods make use of historical data. The goal of these methods is to study what has happened in the past in order to better understand the underlying structure of the data and thereby provide a way of predicting future values. Quantitative forecasting methods can be subdivided into two types time-series and casual. Time-series forecasting methods involve the projection of future values of a variable based entirely on the past and present observations of that variable. For example, the daily closing prices of a particular stock on the New York Stock Exchange constitute a time series. Other examples of economic or business time series are the monthly publication of the Consumer Price Index, the quarterly statements of gross domestic product (GDP). Q3. Steps of the project budgeting process The project budgeting process involves two steps. First, the project cost estimate is allocated to the various work packages in the project work breakdown structure. Second, the budget for each work package is distributed over the duration of the work package Allocating the Total Budgeted Cost : Allocating total project costs for the various elements such as labor, materials, and subcontractors to the appropriate work packages in the work breakdown structure will establish a total budgeted cost (TBC) for each work package. There are two approaches towards establishing the TBC for each work package. One is a top down approach, in which total project costs

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are reviewed in relation to the work scope for each work package. The other is bottom up approach, which is based on an estimate of the costs for the detailed activities associated with each other package. Once detailed activities have been defined time, resource, and cost estimates can be made for each activity. The TBC for each work package will be the sum of the costs of all the activities that make up that work package. Figure below illustrates the allocation of costs to individual work packages in the work breakdown structure for a project. The amount allocated to each work package represents the TBC for completing all the activities associated with the work package. When the budgets for all the work packages are summed, they cannot exceed the total project budgeted cost.

Developing the Cumulative Budgeted Cost: After establishing a total budgeted cost for each work package, the second step in the project budgeting process is to distribute each TBC over the duration of its work package. A cost is determined for each period, based on when the activities that make up the work package are scheduled to be performed. When the TBC for each work package is spread out by time period, it can be determined how much of the budget should have been spent at any point of time. This amount is calculated by adding up the budgeted costs for each time period up to that point in time. CBC is the amount that was budgeted to accomplish the work that was scheduled to be performed up to that point in time. The CBC is the baseline that will be used in analyzing the cost performance of the project.

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Q4. Describe how you can enter tasks in MS project.

Task entry is the main activity in setting up a new project. The tasks which have been identified at the Design Stage must be entered in this stage. The system will hold task information in a task database, which we cannot access directly but is used by the system whenever we view task data. This is one of the two databases the system uses and the other is the resource database. It is important to understand that the system checks the data that it holds and where the data does not cross check then the system will generally update the database to make it right. It is important to keep an eye on this process. As each entry is made, the system will update the appropriate data The order of entry should be in the logical progression.

In order to enter task descriptions and durations one cell at a time: In the Task Name column, select the first available cell and type name In the Duration column, type the value of the duration, Press ENTER Press LEFT ARROW to return to the Task Name column and repeat steps 1 through 4.

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Entering task descriptions and durations by selecting a range: Select the first cell of the desired range. Drag the mouse and type the desired information. Press TAB In the Duration column, type the appropriate information. Repeat steps 4 and 5.

Other Methods of Adding Tasks Tasks can be added in any view where the tasks are displayed. The most obvious methods in addition are as follows: -In the Gantt Chart: An additional task can be added at the end of the list using the Insert, New Task command. Where additional information is required to be entered then this can be done by using the Task Information form which is opened by simply double-clicking a task in the task list. -Using the Task Information Form : It is possible to enter additional tasks using this form but it does not have all the possible entry points. The details of this form are included in the description of the Task Entry View above. -Using the Network Diagram Chart : It is possible to place the additional tasks within the chart by drawing a box and then entering the information within the fields. The relationship can also be entered graphically by pointing to the Predecessor and dragging a line to the Successor.

Q5. Write short notes on network diagram chart.

Network Diagram Chart :The term Network Diagram is derived from Programme Evaluation and Review Technique which was invented for the management of Projects by paper based systems. The Network Diagram chart is a diagrammatic view of the tasks where the position of the task and the lines linking them together represent the detailed steps that comprise the project. It is possible to modify the project in the Network Diagram by adding extra tasks or nodes and creating the links. View the Network Diagram Chart
1. Select Network Diagram Chart from the View menu. 2. From the View, menu, select Zoom and change size of the Nodes 3. From the Format menu, select Box Styles for different style of borders 4. Also check how the contents may be changed using the Boxes Tab. 5. From the Format menu, select Layout for different ways the lines 6. Drag boxes with mouse. Zoom 50% or Entire Project you will find it easier. 7. Double Click on a Node and examine the options in the dialog box.

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Elements of the Network Diagram Chart: Network Diagram Charts use to map out the tasks that are required to complete a project. The critical path consists of the sequence of tasks in the dark Network Diagram boxes. The tasks in the critical path cant be delayed because they have no slack. Like the Gantt chart, the Network Diagram Chart includes a status bar, an entry bar, and the toolbars. In addition, the Network Diagram Chart displays page guidelines so that you can control the placement of the Network Diagram boxes on a page-bypage basis. The perforated line on the right of the screen represents a page break The Network Diagram Box :

A Network Diagram box consists of five fields, as illustrated below. The Task Name, Task ID, Scheduled Start Date, Scheduled Finished Date, and Task Duration are the default fields in the Network Diagram box. The Task Name field is white because it is currently ready for user input. Navigating the Network Diagram Chart :The table below summarizes how to move around the Network Diagram Chart using the keyboard and the mouse

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Q6. Discuss the algorithm for solving the shortest route problem.
A shortest-route problem involves a connected network having a nonnegative cost associated with each branch. One node is designated as the source, and the other node is designated as the sink. These terms dont imply an orientation of the branches. However, it suggests the direction in which the solution algorithm should be applied. In the shortest-route problem, the objective is to determine a path joining the source and the sink such that the sum of the costs associated with the branches in the path is minimum. The following algorithm is to be used to solve the Shortest-route problems Step 1 Construct a master list by tabulating under each node, in ascending order of cost, the branches incident on it. Each branch under a given node is written with that node as its first node. Step 2 Mark the source and assign it the value 0. Locate the cheapest branch incident on the source and encircle it. Next, mark the second node of this branch and assign this node a value equal to the cost of the branch. Delete from the master list all other branches that have the newly marked node as second node. Step 3 If the newly marked node is the sink, go to Step 5. If not, go to Step 4. Step 4 Consider all marked nodes having un-circled branches under them in the current master list. For each one, add the value assigned to the node to the cost of the cheapest un-circled branch under it. Denote the smallest of these sums as M, and circle that branch whose cost contributed to M. Mark the second node of this branch and assign it the value M. Delete from the master list all other branches having this newly starred node as second node. Go to Step 3. Step 5 Z* is the value assigned to the sink. A minimum-cost path is obtained recursively, beginning with the sink, by including in the path each circled branch whose second node belongs to the path. Shortest-Route Algorithm Construct a list for each node in the network of the branches leading out of that node. Each branch is identified by a two-letter symbol;1st letter is the node a branch leaves from and the 2nd letter is the node it goes to. Directly beside the symbol indicate the length of that branch. Arrange the branches in ascending order of the branch lengths.

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