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ë What is Project Management
ë Discuss PERT/CPM

ë Motivating Case Study: The Reliable

Construction Company
ë Ways of Finding the Critical Path

ë Considering Time-Cost Trade-Offs

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ë Project management can be defined as the
coordination of activities with the potential use of
many organizations, both internal and external to
the business, in order to conduct a large scale
project from beginning to end.
ë There are two management science techniques that
are used for project management:
± Program and Evaluation Review Technique (PERT)
± Critical Path Method (CPM)
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ë PERT
± PERT was designed to examine projects from the
standpoint of uncertainty.
ë CPM
± CPM was designed to examine projects from the
standpoint of costs.
ë PERT and CPM techniques have been combined
over time.
ë PERT and CPM both rely heavily on the use of
networks to help plan and display the coordination
of all the activities for a project.
  


 

ë Reliable has just secured a contract to construct a
new plant for a major manufacturer.
ë The contract is for $5.4 million to cover all costs
and any profits.
ë The plant must be finished in a year.
± A penalty of $300,000 will be assessed if Reliable does
not complete the project within 47 weeks.
± A bonus of $150,000 will be paid to Reliable if the
plant is completed within 40 weeks.
 !   

ë Activity
± A distinct task that needs to be performed as
part of the project.
ë Start Node
± This is a node that represents the beginning of
the project.
ë Finish Node
± This node represents the end of the project.
 !   

ë immediate Predecessor
± These are activities that must be completed by no later
than the start time of the given activity.
ë immediate Successor
± Given the immediate predecessor of an activity, this
activity becomes the immediate successor of each of
these immediate predecessors.
± if an immediate successor has multiple immediate
predecessors, then all must be finished before an
activity can begin.
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A Excavate ² 2
B Lay the foundation A 4
C Put up the rough wall B 10
D Put up the roof C 6
E install the exterior plumbing C 4
F install the interior plumbing E 5
G Put up the exterior siding D 7
H Do the exterior painting E, G 9
i Do the electrical work C 7
J Put up the wallboard F, i

install the flooring J 4
L Do the interior painting J 5
M install the exterior fixtures H 2
N install the interior fixtures
, L 6
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ë How can the project be displayed graphically?
ë How much time is required to finish the project if
no delays occur?
ë When is earliest start and finish times for each
activity if no delays occur?
ë What activities are critical bottleneck activities
where delays must be avoided to finish the project
on time?
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ë For non bottleneck activities, how much can an
activity be delayed and yet still keep the project on
time?
ë What is the probability of completing the project
by the deadline?
ë What is the least amount of money needed to
expedite the project to obtain the bonus?
ë How should costs be monitored to keep the project
within budget?
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ë A project network is a network diagram that
uses nodes and arcs to represent the
progression of the activities is a project
from start to finish.
ë Three pieces of information needed:
± Activity information
± Precedence relationship
± Time information
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ë Two types of project networks
± Activity-on-Arc (AOA)
‡ On this diagram, the activity is represented on an
arc, while a node is used to separate an activity from
its immediate predecessors.
± Activity-on-Node (AON)
‡ On this diagram, the activity is represented by the
node, while the arc is used to showed the precedence
relationship between the activities.
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ë A path through a project network is a route
that follows a set of arcs from the start node
to the finish node.
ë The length of a path is defined as the sum of
the durations of the activities of the path.
± What are the paths and their corresponding
lengths for Reliable?
  
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ë This is the path that has the longest length
through the project.
ë The shortest time that a project can
conceivably be finished is the critical path.
± Why?
   

ë Earliest start time of an activity (ES)
± The time at which an activity will begin if there are no
delays in a project.
ë Earliest finish time of an activity (EF)
± The time at which an activity will finish if there are no
delays in a project.
ë Latest start time of an activity (LS)
± The latest possible time that an activity can start
without delaying the project.
   

ë Latest finish time of an activity (LF)
± The latest possible time that an activity can be
completed without delaying the project.
ë Forward pass
± The process of moving through a project from
start to finish to determine the earliest start and
finish times for the activities in the project.
   

ë Backward pass
± The process of moving through a project from finish to
start to determine the latest start and finish times for the
activities in the project.
ë Slack for an activity
± The amount of time that a particular activity can be
delayed without delaying the whole project.
± it is calculated by taking the difference between the
latest finish time with the earliest finish time.
   

ë Earliest start time rule
± The earliest start time for an activity is equal to
the largest of the earliest finish times of its
immediate predecessors.
ë Latest finish time rule
± The latest finish time is equal to the smallest of
the latest start times of its immediate
successors.
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ë Step 1: For the activity that starts the project,
assign an earliest start time of zero, i.e., ES=0.
ë Step 2: For each activity whose ES has just been
obtained, calculate its earliest finish time as ES
plus duration of the activity.
ë Step 3: For each new activity whose immediate
predecessors have EF values, obtain its ES by
using the earliest start time rule.
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ë Step 4: Apply step 2 to calculate EF.
ë Step 5: Repeat step 3 until ES and EF have
been obtained for all activities including the
finish node.
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ë Step 1: For each of the activities that
together complete the project, set its latest
finish time equal to the earliest finish time
of the finish node.
ë Step 2: For each activity whose LF value
has just been obtained, calculate its latest
start time as LS equals LF minus the
duration of the activity.
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ë Step 3: For each new activity whose
immediate successors now have LS values,
obtain its LF by applying the latest finish
time rule.
ë Step 4: Apply step 2 to calculate its LS.

ë Step 5: Repeat step 3 until LF and LS have

been obtained for all activities.

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ë Examine all the paths and find the path with
the maximum length.
ë Calculate the slack for an activity.
± if the slack is zero, it is on the critical path.
± if the slack is positive, it is not on the critical
path.
  &  &$
ë Reliable had an incentive bonus of
$150,000 to finish the project in 40 weeks.
± is it worth while for Reliable to speed-up the
project?
   
ë Crashing an activity refers to taking on
extra expenditures in order to reduce the
duration of an activity below its expected
value.
ë Crashing a project refers to crashing a
number of activities to reduce the duration
of the project.
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ë This is a method concerned with whether it
is worthwhile to crash activities to reduce
the anticipated duration of the project to a
desired value.
ë This assumes that there is a trade-off
between time and cost that has an inverse
relationship.
   

ë Normal Point is the time and cost of an
activity when it is performed in a normal
way.
ë Crash point show the time and cost when
the activity is fully crashed.
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ë it is a method of using the marginal cost of
crashing individual activities on the current
critical path to determine the least
expensive way of reducing the project
duration to an acceptable level.
ë This method requires you to calculate the
cost per desired time unit and compare each
cost with the other costs.
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 ( ) " & ( ) " & Ê! '
A 2 1 $1 0,000 $2 0,000 1 $100,000
B 4 2 320,000 420,000 2 50,000
C 10 7 620,000 60,000 3 0,000
D 6 4 260,000 340,000 2 40,000
E 4 3 410,000 570,000 1 160,000
F 5 3 1 0,000 260,000 2 40,000
G 7 4 900,000 1,020,000 3 40,000
H 9 6 200,000 3 0,000 3 60,000
i 7 5 210,000 270,000 2 30,000
J 6 430,000 490,000 2 30,000

4 3 160,000 200,000 1 40,000
L 5 3 250,000 350,000 2 50,000
M 2 1 100,000 200,000 1 100,000
N 6 3 330,000 510,000 3 60,000
  
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ë Once the marginal cost for crashing each
activity has been conducted, you next want
to choose the crashing that has the smallest
marginal cost.
ë Next, calculate the effect that the crash has
on each path.
± Note: Crashing can potentially cause another
path to become a critical path.
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ë There are three decisions to be made:
± The start time of each activity
± The reduction in each activity due to crashing
± The finish time of the project
ë LP model will be examined in class.