AD351 Project Management What is a project

Operations Management is concerned with the transformation of inputs and resources into outputs. The transformation system to be used is dictated by the charateristics of the required inputs and the desired outputs. For instance, for mass manufacturing (where outputs and inputs are standardized, and products facing high demands are produced in very large quantities), the transformation system may take the form of an assembly line (as in automotive manufacturing). When managing a transformation system, the type of managerial concerns or problems to be addressed depends on the nature of the transformation system being used. For instance, managing an assembly line, we face concerns (which we will study later in this course) particular to assembly lines. A project is another way of transforming inputs and resources into outputs. Projects are the appropriate transformation processes to use when:

unique, custom outputs (products or services) may be demanded, thus, a variety of non-standardized inputs may be used, thus, two consecutive jobs or orders may require totally different durations, typically, the desired production level is quite low, or even a single unit, the transformation process may be stopped or delayed at little cost, and a large part of the workforce needs to be highly skilled.

Projects typically involve large scale, complex production processes. EXAMPLES of products/services produced as projects include: Dams, buildings, airplanes, submarines, election campaigns, management consulting, college term projects, etc.

Describing a Project
Each project is composed of a series of jobs or tasks that must all be completed before we can say, We finished the project. These tasks are referred to as the activities of a project. Managing a project is mainly concerned with - estimating, - planning, and - controlling the costs and the duration of a project. Since the project is made up of activities, the project costs are dictated by the costs of the individual activies, and the project duration is dictated by the duration of the individual activites. Thus, in addition to identifying a list of the activities that make up a project, we need to determine (at least estimates of) the activity costs and the activity durations. There is generally a functional relationship between the cost of an activity and the duration of an activity. Typically, if you increase the resources devoted to an activity, you

may be able to cut down the duration of that activity (to a certain extent). Thus, the duration of an activity can be fixed only if we assume a particular resource utilization for that activity. (Leveling the ground for building a new 3-mile road may take 6 days if you use one bulldozer, but it may take 3 days if you use two bulldozers, one starting at each end of the road.) Thus, to determine the duration of a project, we need to know the activity durations. But to know or to fix the activity durations, we need to assume some resource utilization level (some cost) for each activity. The least we can do (and what is typically done by project managers just to initiate some basic analysis) is to assume a standard or normal resource utilization level (or cost) for each activity so that we can estimate a duration for that activity. Alternatively, we can try to precisely define the aforementioned mathematical relationship that exists between the resources devoted to (or the cost) of an activity and the duration of that activity. (We will discuss this alternative later in greater detail.) In summary, to describe a project, we need to know - the list of the activities, - the duration of each activity, - the cost of each activity. One other peculiarity of a project is that part of the complexity of a project stems from the fact that these activities may need to be performed in a particular sequence. That is, in some projects, all activites can be worked on simultaneously. In other projects, no activities can be worked on simultaneously and they all need to worked on in a sequence. Generally, however, some activities can be worked on simultaneously while some others need to follow certain sequencing rules. Thus, to describe a project, we finally need to know these sequencing requirements. This information is typically generated by determining the Immediate Prerequisite Activities of each activity. The Immediate Prerequisite Activities of an activity are the set of activities that must be finished right before that activity can be started. EXAMPLE: Building the third floor of a three-story house is an immediate prerequiste activity for the activity of building the roof. Of course, before you can build the roof, the foundation, the first floor, the second floor must also be completed. But these latter activities are not immediate prerequisites of building the roof.

Example Project

Here is an example project. (Cost data is not provided here to keep it simple.) ACTIVITIES IMMEDIATE PREREQUISITES ACTIVITY DURATION (Days)

A B C D E F G H I

B,C A A E,F D F,H

4 4 2 2 4 6 2 3 5

Note that the activities are assigned some labels (A, B, C, etc. above). In general, activities are assigned certain descriptive, short labels or variable names to simplify referring to them. For instance, in a road construction project, the activity of leveling the ground may be referred to as Activity LGr; or the activity of pouring the cement foundation may be labeled as Activity CEMF. Note that some activities (A, B and C above) do not have any immediate prerequisite activities. Obviously, these are the activities that can start the moment the project is started. There is no rule that the list of activities shows the activities in any particular order (for instance, from the beginning towards the end of the project, as in the example above). Note that activities may have zero, one, or more than one immediate prerequisites. If an activity has more than one immediate prerequisite, that activity can not be started until all of the immediate prerequisite activities are completed. We will make use of this simple example project to illustrate some project management concepts and techniques.

Visualizing a Project
A picture is worth a thousand words! Projects are visualized using Network Diagrams, or alternatively, using Gantt Charts. Both of these graphical approaches depict the activities that make up a project across the time axis. The primary difference is that in Network Diagrams, the visual representation of an activity is independent of the duration of the activity, while in a Gantt Chart, each activity is visualized in a way that signals the duration of that activity, too. We will mostly use Network Diagrams (which are sufficient for PERT and CPM analysis). Gantt Charts do show more visual information (i.e., the activity durations), but they were basically ideal back when managers managed projects by hand. Today, with the advance of computing power and project optimization software, Gantt Charts are no longer required to manage a project.

A. Network Diagrams
Network diagrams are composed of Nodes and Arcs, linked to each other. In general: Nodes are circles, typically representing various entities or events. Arcs are paths, typically representing various connections or flows. Arcs are generally used as directed arcs, i.e., arrows, or lines with arrow heads, showing a direction of movement. Two basic kinds network diagrams are used to visualize projects: 1) Activities-on-Nodes (AON) Network Diagrams 2) Activities-on-Arcs (AOA) Network Diagrams As the terminology implies, in AON diagrams, the activities are shown on the nodes, whereas in AOA diagrams, the activities are shown on the directed arcs.

A.1. Rules for developing Activities-On-Nodes network diagrams of projects

1. Activities are denoted by the nodes; and each activity is denoted by a unique node. 2. Each node must correspond to an activity, except that: 3. so called dummy nodes (i.e., fake nodes) may be used to show the event of beginning a project, and/or the event of ending a project. 3. Precedence relationships between activities are shown by the (solid, straight line) directed arcs. To show the precedence relationships the node for an activity X must be separately connected to the nodes for each of its immediate prerequisite activities by a directed arc that emanates from the node for that immediate prerequisite acivity and leads to the node for activity X. 4. No portion of the network diagram must ever proceed right to left. These are rather simple rules. (The rules for developing AOA networks are more complex.) AON NETWORK OF EXAMPLE PROJECT:

The above AON network uses dummy nodes for the beginning of the project and for the end of the project. (These dummy nodes are optional.) Note that the nodes are drawn large enough to accommodate the labels of the activities. The AON network reflects the list of the activities and the immediate prerequiste relationships. Whats missing from the diagram is the activity duration (and cost) data. This data can be noted right next to each activity node.

A.2. Rules for developing Activities-On-Arcs network diagrams of projects

1. Activities are denoted by solid, straight line directed arcs; and each activity is denoted by a unique solid, straight line directed arc. 2. Each solid, straight line directed arc must correspond to an activity. 3. Each arc must have a beginning node and an ending node, showing the beginning and the end (respectively) of the activity the arc represents. However, these beginning and ending nodes need not be unique to one activity. For instance: - More than one activity can share the same beginning node, or - More than one activity can share the same anding node, or - The same node may act as the ending node of one or more activities while also acting as the beginning node of other activities. 4. To show the precedence relationships the node at the beginning of the arc for an activity X must be separately connected to the nodes at the ends of each of its immediate prerequisite activities.

5. So called dummy arcs (i.e., fake arcs) denoted by straight, broken line arcs may be used to represent dummy activities ( fake activities which do not take any real time or cost any real money) to connect a pair of distant nodes. 6. Any given two nodes may be connected by at most one directed arc. (This rule actually emphasizes the rule that the activity arcs should be drawn as straight lines, rather than as curves.) 7. Two or more activity arcs should not cross each other (but a dummy arcs can cross other arcs.) 8. A single node must show the beginning of the project, and a single node must show the end of the project. 9. No portion of the network diagram must ever proceed right to left. These are rather complex rules. The rules for developing AON networks were much simpler. However, both AON and AOA networks have certain advantages, and thus are both commonly used by project managers. Rule 5 is the most useful one! These dummy activities enable us to easily show the immediate prerequisites of various activities. However, such dummy arcs must be used sparingly. Redundant, unnecessary dummy arcs will only complicate a network diagram, and thus must be avoided (and will be penalized in exams). AON NETWORK OF EXAMPLE PROJECT:

Note that A,B and C can all start at the same node (Rule 3). E and F start at the same node, which is also the ending node of activity A. That is, the beginning nodes of activities E and F are connected to (or in fact, are one and the same as) the ending node of activity A. Thus, this diagram implies that both E and F require A as an immediate prerequisite (Rule 4). Note also that a dummy activity (connecting the ending node of C to the beginning node of D) is used to show that C is an immediate prerequisite for D. Finally, observe that the nodes used in AOA diagrams can be much smaller than those used in AON diagrams. The AOA network reflects the list of activities and the immediate prerequiste relationships. Whats missing from the diagram is the activity duration (and cost) data. This data can be noted right along each activitys arc. Such a network is shown below.

NOTE 1: Observe that the way we visualize projects implies that all activities with the identical set of immediate prerequisites can be undertaken simultaneously. For instance, the above AOA diagram implies that once A is completed, activities E and F can be worked on simultaneously. Similarly, the diagram implies that the moment the project starts, we can work on activities A, B and C at the same time. This basically assumes that we have sufficient resources to start all activities at the earliest possible moment it is (precedence-wise) possible to start them. Of course, this may not be correct. For instance, resource or funding limitations may force us to work on A, B and C in a particular sequence. NOTE 2: Also observe that the immediate prerequiste relationships we discussed so far were all logical AND type conditions. If activity D had the immediate prerequistes B and C (as in the diagram above), this meant that both B and C had to be completed before we could start D. But what if a logical OR relationship exists? For instance, what if D could start only after either one of B or C were completed? How could you respresent that diagrammatically? Obviously, in this case we would need to use a different method of showing the immediate prerequisites of activity D.

B. Gantt charts
Note that in network diagrams, there is no visual clue to the duration of an activity. For instance, in an AON network, the node sizes are not propostional to the duration of the activity. Similarly, in an AOA diagram, the lengths of the directed arcs are not drawn proportional to the duration of the activity. The arc lengths are dictated merely by visual clarity or artistic concerns. (For instance, in the diagram above, activity I which takes five days is shown much shorter than activity G which takes two days.) Gantt charts are charts similar to the Activities-On-Arcs network diagrams that also show the duration of each activity by drawing the arc for the activity in a length proportional to the duration of that activity. That is, the horizontal axis of such a chart can be visualized as the time axis. Thus, the primary advantage of a Gantt chart is that how long thge project will last can immediately be read off the chart, once the chart is constructed. The other primary difference is that in a Gantt chart, all activity arcs are drawn as strictly horizontal line segments. Finally, as also implied in the AOA and AON network diagrams of projects, Gantt Charts are also typically drawn to start all activities at the earliest possible moment it is (precedence-wise) possible to start them. (See explanation below.)

Heres the Gannt Chart corresponding to the example project. GANTT CHART OF EXAMPLE PROJECT:

In the Gantt Chart above, note that activity C is shown to start immediately after the project starts. However, as an immediate prerequiste of activity D, it could have been started as late as the end of Day 2 without delaying activity D at all. Similarly, note that activity H is shown above to start immediately after activity D is completed. However, H, which is an immediate prerequisite of activity I, could have been delayed by one day and could have started right at the end of the 10th day, and this wouldnt delay the activity I at all. This is what we mean by saying that Gantt Charts are also typically drawn to start all activities at the earliest possible moment it is (precedence-wise) possible to start them. The Gantt Chart above directly shows that if the activities are all started at their earliest possible time, the project will take exactly 15 days. On the next page, the Gantt chart for a real consulting project expected to take 115 working days is shown. This Gantt chart depicts the scheduled workloads of six different consulting teams or groups, including an OEM (Original Equipment Manufacturer) plus a programming staff. In the diagram, the project is separated into four overlapping phases or sub-projects, shown numbered 0 through 3. In each phase, the various activities are aggregated into general categories such as Design (DES), Modeling (MOD), Research (RES), Selection (SEL), Documentation (DOC), Software Development (DEV), Testing and Validation (T&V), etc. This Gantt chart has a resouce utilization or manpower assignment perspective: it shows which team will do what and when. This example shows that there are many different ways in which projects may be visualized using the basic Gantt charting ideas. If an AON or AOA network diagram are used, the project duration is not immediately and visually obvious from the diagram. In these cases, we need to do a bit more work to calculate the projects duration.

SAMPLE PROBLEM 1: Draw an activities-on-arcs network for the following project: Immediate Activity Prerequisites REM BB BB Z Q B52s A C U2 JOE

Z BB, Z JOE, U2 Z, BB C, Q, REM, B52s REM, B52s

(Solution to this problem appears at the very end of these class notes.) SAMPLE PROBLEM 2: Consider the project the AON network diagram of which is provided below. Construct the corresponding list of activities and the list of immediate prerequisites first, and then draw the corresponding AOA network diagram for the project.

Project Management Issues

We already noted above that managing a project is mainly concerned with - estimating, - planning, and - controlling the costs and the duration of a project. In this course, we will study some basic project management tools: PERT (Project Evaluation and Review Technique) is concerned with estimating the duration of a project, assuming that we know the duration of each activity (that is, assuming we will devote a particular resource level for each activity). CPM (Critical Path Method) is concerned with determining the ideal resource utilization levels or the ideal cost (and thus the ideal duration) for each activity in a project. We can cut down the duration of a project by pouring more money into it, but that obviously costs us more money. But if we let a project take too much time, our costs can again increase or we may lose the customer. We need information on the duration and the cost of a project not only before we start a project (to plan the project), not only as our work on the project progresses along (to control if the project is coming along as we planned it before), but also even before we bid on the project. Competitive Bidding is concerned with setting the correct strategies

and policies when we as the customer - offer our project to be bid on, or when we as the producer bid on someone elses project in hope of securing the right to work on it. In competitive bidding for a project, factors to take into account include: - Expected project cost - Expected project duration - Idle resources we have, and the cost of keeping them idle - Bidding positions of the competitors - Corresponding price bids and duration bids.

PERT Project Evaluation and Review Technique

PERT is a mathematical methodology for analyzing an AOA or an AON network diagram of a project to determine how long the entire project will take. Since some activities can be undertaken simultaneously, the project duration is obviously not just the sum of the durations of all the activities. A projects duration is the shortest time required to finish the project. And viewing a project as a network, as a network composed of many distinct paths leading from the beginning to the end of the network the shortest time by the end of which it is possible to complete the project is given by the duration of the longest path from the beginning to the end of that project! Thus, theoretically, we could calculate a projects duration by: (1) first, identifying all disntict paths leading from the beginning to the end of the network, (2) then, calculating the total duration of all activities on each of these paths, and (3) finally, selecting the duration of the path with the longest duration. Unfortunately, this logical approach invariably fails in practice. Consider again the example project given above, which has five possible paths: PATH 1: A-E-G PATH 2: A-F-Dummy-G PATH 3: A-F-Dummy-I PATH 4: B-D-H-I PATH 5: C-Dummy-D-H-I Even such a simple project as the one above may have many distinct paths (sequences of activities) from the beginning node to the ending node of the project. With real-life projects involving hundreds or thousands of activities, and many dummy arcs crossing from one path to another, there typically are so many possible (paths) ways of getting from the beginning to the ending node of the project that it becomes impossible to identify all the paths

of the project. That is, Step (1) fails, and hence, the project duration can not be calculatesd using the simple three-step approach above. PERT methodology solves this problem. Instead of identifying all possible paths from beginning to end, PERT calculates the time of arrival at each node of the project. Obviously, time of arrival at the last node is the duration of the project. In particular, in PERT, we calculate the following four time measures for each node: ES time: The Earliest Start time (The earliest possible time by the end of which one can start an activity); LS time: The Latest Start time (The latest possible time by the end of which one can start an activity); EF time: The Eraliest Finish time (The earliest possible time by the end of which one can finish an activity); LF time: The Latest Finish time (The latest possible time by the end of which one can finish an activity). The exact definitions of these four time measures depends on whether AOA or AON networks are used to analyze the project. For instance, using the Activities-On-Arcs network diagram (where nodes are merely the beginning and ending points of activities), we could precisely define these four time measures as: ES time: The earliest possible time by the end of which one can arrive at a node to start any following activities; LS time: The latest possible time by the end of which one can arrive at a node and start any following activities, (latest possible in the sense of) without delaying the project duration any more than necessary; EF time: The earliest possible time by the end of which one can arrive at a node and finish any preceeding activities; LF time: The latest possible time by the end of which one can arrive at a node and finish any preceeding activities, (latest possible in the sense of) without delaying the project duration any more than necessary. Obviously, if we visualize a project using an A-O-N network diagram, the nodes will represent the activities themselves, and the exact definition of these four time measures will be slightly different. For instance, the ES-time for the node for some activity X would than be defined as The earliest possible time by the end of which one can start activity X Actually, among the four time measures noted above, the Earliest Start times are all we need to calculate the duration of a project. The other three quantities provide us with other useful information about the project. So, lets first study how to calculate the ES time for each node.

Calculation of Earliest Start times:

The ES-times of the nodes of an AOA network are calculated recursively or iteratively, one node at a time, starting with the beginning node of the project, continuing with the following nodes, and working towards the final node of the project.

To help differentiate the nodes of an AOA network from each other, we can assign numbers to the nodes, as in the following AOA diagram:

Numbering the nodes, we start with the beginning node of the project as node number 0. We use consecutive integers (natural numbers) as the node numbers, and we make sure that we do not assign a number to a node unless all its preceeding nodes have already been numbered. By definition, the ES-time of the very first node is zero! That is, the earliest possible time by the end of which one can arrive at Node 0 to start the project is by the end of day zero. Here, we are assuming that we define the start of the project as the end of day zero, and thus, the ES-time for Node 0 is zero. The calculate the ES-times of the following nodes, we use the general rule: The ES time of any Node

i is given by the maximum of the quantities: [ES time of immediately preceeding node, Node j , plus the duration of activity between Node j and Node i ], j.

where such quantities are calculated for all immediately preceeding nodes

The ES-times calculated are usually recorded on the network diagram, right next to the corresponding node. The following steps illustrate the use of the above formula in calculation of the ES-times and the project completion time for the example project. Below, we let the notation ES(i) represent the ES-time for Node i . 1) 2) 3) 4) ES-time ES-time ES-time ES-time for for for for Node Node Node Node 0= 1= 2= 3= ES(0)= ES(1)= ES(2)= ES(3)= Zero! Zero + 4 = 4 days, Zero + 2 = 2 days, max {(ES(0) + 4) , (ES(2) + 0)} = max {(0 + 4) , (2 + 0)} = 4 days, 4 + 2 = 6 days, 4 + 6 = 10 days, max {(ES(5) + 0) , (ES(1) + 4)} = max {(10 + 0) , (4 + 4)} = 10 days, max {(ES(4) + 3) , (ES(5) + 0)} = max {(6 + 3), (10 + 0)} = 10 days max {(ES(7) - 0) , (ES(7) + 5)} = max {(10 + 2) , (10 + 5)} =15 days.

5) ES-time for Node 4= ES(4)= 6) ES-time for Node 5= ES(5)= 7) ES-time for Node 6= ES(6)= 8) ES-time for Node 7= ES(7)= 9) ES-time for Node 8= ES(8)=

In Step 9, we determined that the earliest possible time by the end of which one can arrive at a Node 8 to start any following activities which are none is by the end of day 15. Thus, we have found that (given the stated activity durations) this project can be finished in 15 days, and no sooner.

Calculation of Latest Start times:

The LS-times of the nodes are calculated - recursively or iteratively, one node at a time, - starting with the last node of the project, - continuing with the preceeding nodes, and - working towards the first node of the project. By definition, the LS-time of the very last node is equal to the project duration, as calculated above, as the ES-time of the final node! That is, the latest possible time by the end of which one can arrive at the last node and not delay the project any more than necessary is by the end of calculated completion day of the project. Here, we are again assuming that we define the start of the project as the end of day zero.

i is given by the minimum of the quantities: [LS time of immediately following node, Node j , minus the duration of activity between Node i and Node j ], where such quantities are calculated for all immediately following nodes j .
As a general rule, the LS time of any Node The following steps illustrate the use of the above formula in calculation of the LS-times for the example project. Below, we let LS(i) represent the LS-time for Node i. 1) 2) 3) 4) 5) 6) 7) 8) LS-time LS-time LS-time LS-time LS-time LS-time LS-time LS-time of of of of of of of of Node Node Node Node Node Node Node Node 8 7 6 5 4 3 2 1 = = = = = = = = LS(8) LS(7) LS(6) LS(5) LS(4) LS(3) LS(2) LS(1) = = = = = = = = 15 days = ES(8). LS(8) 5 = 15 5 = 10 days. LS(8) 2 = 15 2 = 13 days. min {(LS(6) - 4) , (LS(7) - 0)} = min {(13 - 0) , (10 - 0)} = 10 days, LS(7) 3 = 10 3 = 7 days. LS(4) 2 = 7 2 = 5 days. LS(3) 0 = 5 0 = 5 days. min {(LS(5) - 6) , (LS(6) - 4)} = min {(10 - 6) , (13 - 4)} = 4 days, min {(LS(1) - 4) , (LS(2) - 2) , (LS(3) - 4)} = min {(4 - 4) , (5 - 2) , (5 - 4)} = 0 days!

9) LS-time of Node 0 = LS(0) =

Note that LS(0), should always be zero, assuming that we define the start of the project as time zero. You can use this for double-checking your calculations. If your LS(0) is not zero, you must have made an arithmetic or logic error along the way.

The LS-times thus calculated are also usually recorded on the network diagram, right next to the corresponding node. Typically, the ES and LS times are recorded in small square boxes as shown above (ES to left and LS to right). Why do we even bother to calculate these LS-times? Note in the example above that for some nodes, the ES and LS times are identical, while for some nodes, the LS time is larger than the ES time for that node. When the ES and LS times of a given node match, this means that the earliest possible arrival time at that node is also the latest possible arrival time at that node. That is, there is no room for being late to that node. Such nodes are assiociated with the critical activities of a project, i.e., activities that can not be delayed or that can not take more time than planned without causing delays in the duration of the project. That is, calculating the LS times of nodes and comparing them to the ES times of the corresponding nodes enables us to identify the critical activities of a project. You should remember that each project is made up of a large number of paths starting at the beginning node and ending at the final node of the project, and that the longest one of these paths actually determines the length of the project. That longest path is referred to as the critical path, and the activities on the critical path are the activities that are referred to as the critical activities. Our discussion above implies that for any Node i, if LS(i) > ES(i), then that node can not be on a critical path. The critical path must be a path traveling through the nodes all of which have matching ES and LS pairs. For instance, in the example project above, Node 6 can not be on a critical path. Similarly, Nodes 2, 3 and 4 can not be on a critical path. These observations imply that the critical path (from beginning to end of the project) can only be the one through the nodes 0, 1, 5, 7 and 8. That is, the critical activities are activities located between these specific nodes. That is, the critical activities are activities A, F, and I. The other activities of this project are not critical activities, in the sense that minor (marginal) changes in their durations have no impact on the project duration. The difference between the ES time and the LS time of the nodes gives an indication of the slack or extra time we have along that part of a project. For instance, ES(6)=10 and LS(6)=13, implying that if we arrived in Node 6 by the end of day 10, we actually would have (13-10=) 3 days slack time to fool around (say, to go to Paris for a short vacation) before we had to start activity G. Also note that a project may have more than one critical path. Obviously, the above discussion presents just the tip of an iceberg! If interested, we can learn much more about the PERT methodology. Of immediate interest are the answers to questions like: - What do we use the EF and LF time measures for? - How can we calculate the project duration if resources are limited and we can not start all the simultaneous activities at the above calculated ES-times? - Scheduling the activities of a project as dictated by the calculated ES-times may end up dictating an uneven usage of various resources (such as labor). How can we schedule the actvities of a project while also ensuring that the resource utilization lavels will be steady and hence easier to manage? - What if the activity durations can not be known deterministically, but are probabilistic random variables? - etc... A few notes about the case where activity durations are probabilistic are in order.

PERT with probabilistic activity durations

The duration of even the simplest activity can not generally be known with certainty. Typically, an activitys duration is a random variable, distributed according to a probability density function. If the durations of the critical activities are probablistic, then the activity durations that we used above in the PERT analysis could at best be expected durations (mean durations) of these activities. But if so, the ES time for the last node calculated as outlined above does not give us the exact project duration, but an expected project duration. Typically, the propability density functions of activity durations are not symmetrical. They can be (and generally are) skewed to one side or the other. Thus, we can not just assume that activity durations come from the (well known and familiar) Normal distribution. Empirical evidence suggests that a distribution called the Beta distribution can reliably represent the probability density function of the duration of any project activity. The Beta distribution is a distribution that can be skewed to the left, or it can be skewed to the right, or it can even be symmetrical, depending on the values of certain parameters. In practice, information about the shape of the Beta distribution for the duration of any activity is obtained by answering three questions: 1) What is the most likely duration of the activity? (Lets call this quantity, m.) 2) What is the most optimistic duration of the activity? (Lets call this quantity, a.) 3) What is the most pessimistic duration of the activity? (Lets call this quantity, b.) Depending on how far the parameters a and b are from the modal value m, the distribution can be symmetric around its mean, or be skewed to left or right. Given estimates of these three parameters, the shape of the Beta distrbution involved can be identified.

For any given, a, m and b values, the expected value (mean) of the duration tX of any activity X can be (approximately) found by using the formula: + 4m + b . 6 The variance of the probability distribution of the duration tX of the activity can be (approximately) found using the formula: Var(tX) [(b a)/6] . Given these approximation formulas for the mean and the variance of the duration of any activity, project managers can use basic statistics to derive more accurate information about how long a project will take. In particular, ES and LS times can initially be calculated using merely the expected activity durations E(tX) [calculated using the formula above] as the duration of each activity. Of course, as we noted above, the ES
2

E(tX) a

time thus calculated for the last node then gives us only the expected project duration. By the Central Limit Theorem of statistics, no matter what the shapes of the distributions of the durations of the critical activities, the total project duration would approximately be Normally distributed (as long as at least five or six activities are on the critical path). That is, the probability density function of the total project duration would be a symmetrical, bell shaped distribution. But this implies that the expected project duration calculated is right at the very center of such a symmetric distribution. That is, there is actually a 50% probability that the actual project duration will be less than or equal to this expected project duration, and there similarly is a 50% probability that the actual project duration will be more than or equal to this expected project duration! So, in our example project above, if the duration numbers we used above were expected durations of the activities, there would be a 0.5 probability that the project will actually take more than (or equal to) 15 days. Thats a huge probability! So, no honest contractor would bid 15 days for such a project, knowing full well that they will not be able to ceomplete the project in 15 days with a 50% probability What is the variance of the project duration? Basic statistics teaches us that since the project duration is just the sum of the durations of the critical activities, the variance of the project duration can be calculated as the sum of the variances of the durations of these critical activities (assuming the critical activity durations are not correlated). For those of you who know sufficient statistics, something really striking should also be obvious by now: with probabilistic activity durations, there is no single path that can be identified as a crtitical path! Every path has some probability of turning out to be the critical path! PERT analysis can be combined with basic statistics to extend this statistical treatment to calculate (for instance): - What is the probability that the project will be completed in not 15 days, but, say, in 18 days? - If we wanted to be, say, 95% sure that we will be able to complete the project on or before the date we promised, in how many days would we promise to complete such a project? - Can we a determine a range around the expected value of the project duration so that we will be confident that the project will be completed with a duration in that range with a probability of, say, 0.99? - What is the probabilility that a path that does not appear to be critical will turn out to be a critical path? All these are further details of the PERT methodology. The answers to some of the above questions should be obvious to those of you with sufficient statistical backgrounds. We will not get into such details since this is only a basic exposure to project management.

CPM Critical Path Management

CPM is a mathematical methodology for analyzing an AOA or an AON network diagram of a project to determine how much resources (e.g., money or labor or equipment) to devote to each activity (and thus, determining how long each activity should take). CPM is concerned with how long the entire project should take and how much it should cost. In one sense, PERT is time-oriented while CPM is cost-oriented. CPM aims to determine the ideal, optimal cost of a project, taking into account the direct costs (i.e., activity-related costs) as well as the overhead costs (i.e., fixed costs that

are incurred every day the project lasts). In fact, we also need to take into account any rewards for finishing a project early, and any penalties for finishing a project late. There is a relation between the duration of any activity and the cost of that activity. Typically, any activity normally requires a standard set of resources, and when these normal set of resources are allocated to that activity, the activity takes a certain amount of time. That duration is called the Normal Time of that activity, and the cost of the corresponding resources allocated is referred to as the Normal Cost of that activity. However, increasing the resources (labor, equipment, etc.) devoted to an activity may result in a decrease in the duration of an activity. This is called crashing an activity. The duration of any activity can be decreased only to a certain minimum limit. This requires a large set of resources to be allocated to that activity. That minimum possible duration of the activity is referred to as the Crash Time of that activity, and the cost of the corresponding resources allocated is referred to as the Crash Cost of that activity. Continuous Crashing: Continuous substitution possibilities between the cost and the duration of an activity. Jump Crashing: Crashing possibilities in discrete jumps only, as in a stepfunction.

In practice, most project managers prefer to visualize the crashing possibilities assuming that the time-cost relationships are linear. Example piecewise-linear crashing cost functions are shown below.

Because it generally is easier to deal with linear rather than non-linear mathematics, non-linear crashing relationships are typically approximated as piecewiese-linear relationship with many pieces, as shown in panels C and F above. Cases A,B and C are the (convex) cases where crashing gets progressively costlier the more we crash. Cases D,E and F are the (concave) cases wher crashing gets easier the more we crash.

In cases where there multiple linear segments in the time-cost relationships, the terminology we use may be expanded. For instance, in panels A nd D, the Normal Time can be said to be crashed down to a Crash 1 Time at a Crash 1 Cost, and then further crashed to a Crash 2 Time at a Crash 2 Cost. As a general rule, only the critical activities of a project should be canditates for crashing. That is, it can pay to crash only the activities that are on a critical path, since the critical path is the (longest) path that dictates the duration of a project. Noncritical activities on non-critical paths already have slack times, and crashing them would not affect the duration of the project. A second equally obvious rule of thumb is that, if we wanted to crash the duration of a project, and if we had two or more critical activites that could all be crashed, we would crash the cheapest to crash critical activity first. Of course, crashing increases the direct costs of the project. But in return, if the project takes less time because certain critical activities are crashed, then the overhead costs will be incurred over a shorter period of time. That is, intelligent crashing will increase direct costs but will decrease the overhead costs. In addition, crashing, if it reduces the project duration, will increase any rewards we may get for finishing the project quickly. That is, while crashing costs us money, it may also increase our project revenues. On the other hand, not crashing a project may result in the project being delivered late, and may increase the penalty costs levied on us for being late. CPM is a method for determining intelligent crashing strategies so that the project will be completed with lowest possible costs and largest possible profits (minimum direct costs, penalty cost, overhead costs, and maximum rewards). What makes this problem hard is that crashing changes the critical paths! Briefly, if we crash critical activities, the critical path on which those critical activities were located start taking less time, and that path stops being the critical (longest) path. Instead, a path that was not critical before may become the critical path. In that case, we need to crash the activities on that new critical path. But once we start crashing those activities, yet another path may become critical. In general, crashing increases the number of critical paths in a project. So, the question of whether it is worth to crash an activity, or of which activities to crash and which activities not to crash, and how much to crash an activity, are tough questions to answer. The problem gets even more complex if we accept the activity durations may be probabilistic, in which case (as noted above) every path has some probability of turning out to be the critical path! Generally, we develop mathematical models of such decision making problems to find good solutions to them.

Digression: Mathematical Modeling

Many times, complex problems are analyzed by studying their models. Models used could be iconic models (smaller scale representations), or analog models (which use one attribute of one entity to model another attribute of a different entity), or mathematical models. In engineering, iconic and analog models find frequent use. In management (finance, marketing, operations, etc.), we typically use mathematical models.

Mathematical models describe a system by using variables and mathematical functions (of these variables) that describe the system.

Problem Identification
In modeling managerial problems, the first step is problem identification. A problem is identified follwing specific steps, in a specific sequence: 1. First, all the relevant decisions of the problem are vebally described, 2. Second, all the relevant rules or regulations or laws of nature that a decision maker is required to observe (or obey) when taking decisions are verbally described, and 3. Finally, relevant measures of performance, that is, what distinguishes good decisions from bad decisions is verbally described. Decisions may be defined as good or bad not only based on specific performance measures (such as profits), but also based on the extent to which they obey the rules identified in Step 2 or not. The more accurate these verbal descriptions are, the better-defined will be the problem to be solved, and the easier will be the development of a mathematical model of the problem. The primary reason why students may face difficulties when modeling a managerial problem is usually not a lack of mathematical knowledge, but a failure in identifying the problem carefully or completely. A rule is a relevant rule if and only if it relates to the relevant decisions of the problem. If a rule seems to relate to a factor not listed among the decisions, either the rule is totally immaterial, or the factor must have been included among the relevant decisions. Similarly, a measure of performance is relevant if and only if it relates to the relevant edecisions of the problem. Accordingly, while going through a particular step of problem identification, you may realize that you need to go back and re-visit your work in a previous step. For instance, while thinking about the measures of performance, its possible to realize that there are actually several other relevant decisions not identified so far in Step 1.

Problem Modeling
Following problem identification, mathematical modeling of the identified problem starts. Mathematical modeling basically follows the same three steps: 1. Defining the Decision Variables: Each relevant decision is defined as a variable. 2. Defining the Constraints: Then, all the relevant rules, regulations, and laws of nature (as identified above) are translated into constraints using mathematical functions of the decision variables (and any other data or parameters of the problem). 3. Defining the Objective Function(s): Finally, the measures of performance are expressed as functions of the decision variables. An objective function is typically either maximized, or minimized. After a mathematical model of the problem is developed, the model is analyzed: Possible solution procedures are identified,

Numerical reults are derived, and Sensitivity of these results is studied. The solution is then implemented, and updated frequently if necessary.

Identifying the CPM problem

Well make use of a different example to illustrate the CPM modeling process. Consider the following project: IMMED. Normal Normal Crash Crash ACTIVITIES PREREQ. Time Cost Time Cost

A B C D E F G

A A B C,D C,D E,F

21 5 7 2 5 8 2 50

45,000 8,000 6,000 6,000 10,000 3,500 12,000 90,500

18 4 5 1 6 40

51,000 9,000 8,500 8,000 5,500 104,000

The costs above are in dollars. The durations specified are in days. We assume that the crashing costs involved in this project are all linear functions. Assume that the project overhead costs incurred during the project are estimated as $1200 per each day the project is going on. This project is already bid on and the contract is won. A project duration of 36 days was bid. The contract includes clauses stipulating a penalty of $1200/day for each day the project is late, and a reward of $1200/day for each day r=the project is early (beyond the promised delivery day). In these class notes, we skip the details of the (usually painful) discussions of the problem identification phase. In summary: 1) Relevant decsions: The CPM problem involves determining how much we should ideally crash each activity. Equivalently, our relevant decisions are simply the durations of all the activities. Beyond the activity durations, we also want to determine the (resulting) project duration, and the resulting project costs, but of course, these are not independent decisions. That is, our decisions about the activity durations will imply a corresponding project duration and costs. 2) Relevant restrictions: The fact that our activity duration decisions dictate the projects duration means that there apparently are some rules we must follow in determining the projects duration. For instance, we can not say, Were not going to crash any activities and Our project takes a total of 34 days! What are the rules that prevent us from saying this? These are simply the rules that say that, We have a network here! Some activities have certain prerequisites! And you can not finish the project before all of these activities are completed!

That is, there is a rule that says that the project is not completed until you reach Node 6. (See the AOA network diagram above.) There is a similar rule that says that you can not reach Node 6 before you reach Node 5 and then complete activity G, and so on. That is, what is obvious to us are actually the rules of this decision making problem. Because

they are obvious, it is usually too difficult to realize that these are rules (constraints) that must be observed. This is the hardest part of problem identification. Facts or laws of nature stare at you at the face, and you can not realize that they are actually rules and regulations that are imposed on how you can and can not decide. Remember that in the problem identification phase, all such rules must be verbally expressed in reference to your relevant decisions. So, what if you can not construct a meaningful sentence thats relating one or more of your relevant decisions to a rule you believe is important? Does that always mean that that rule is irrelevant? No! It may simply mean that the rule you want to recognize actually relates to some other factors that you have so far forgotten to identify as a relevant decision, but should have identified as a relevant decisions (or it may simply mean that you can not communicate your thoughts well). In these efforts to verbalize the rules of the problem, we may realize that there are other decisions relevant to the problem. For instance, the rule that says that, You can not reach Node 6 before you reach Node 5, and then complete activity G probably hints in the direction that we will actually decide on ES-times (when to arrive at each of the network nodes), too (independently of our activity duration decisions). Upon hearing this, you may say Of course!, but without hearing it first, you may fail to realize that the ES-times are separate decision variables. (This failure is typically associated with the failure of the student to realize that activities B and C do not have to be started immediately after A is finished. Starting (or not starting) B and C the moment A is completed is a conscious managerial choice. This is a typical example of how you may need to revisit your earlier steps of problem identification. Here, after identifying the relevant decisions, and while discussing the rules to be imposed on these relevant decisions, we are realizing that we have forgotten to identify another set of relevant decisions: the start time of activities following a node. As another rule or law of nature, observe that we can not say, Well complete Activity A in 15 days! That is, we have certain limitations on how we can select an activitys duration. Each activitys duration can only be set as a number between its Normal Time and its Crash Time. This is so obvious. Yet, because it is so obvious, it may be hard to realize that this is part of the relevant rules of the problem. 3) Measure of Performance: In this example, well be making good decisions if we somehow minimize the total cost of the project. Any decision that results in a lower total cost (lower direct costs, lower overhead costs, lower penalties, and higher rewards) leaves us better off. The direct (activity) costs will depend on the activity duration selections. The overhead costs incurred will be dictated by the resulting total duration of the project. The penalty costs and rewards will also be defined by how long the project will take and the promised project completion time. (It is not uncommon for the discussion of the measure of performance of a problem to result in the realization that still other relevant decisions, or other rules or laws imposed on these relevant decisions, have yet to be recognized. )

Modeling the CPM problem

Following this brief discussion, we can now start modeling this CPM problem. Defining the Decision Variables:

Let:

t i = Duration of activity i, for i {A,B,,G};

E k = Start time of (any) activities following Node number k, for k = 0,1,2,,6;

Defining the constraint functions: 1. Network Constraints E0= 0 E1 E0+ tA E2 E1+ tB E3 E1+ tC E3 E2+ tD E4 E3+ tE E5 E3+ tF E5 E4 E6 E5+ tG 2. Activity Duration Constraints 18 t A 21 4 tB 5 5 tC 7 1 tD 2 tE = 5 6 tF 8 tG = 2 Defining the Objective Function: 1. Activity costs Since we are assuming linear costs of crashing, to calculate the activity cost associated with any activity duration decision, we can start by calculating the slope of the crashing cost function for each activity. The slope of the crashing cost functions can be calculated as: Cost Slope = Crash Cost Normal Cost Crash Time Normal Time (which will yield a negative number.) The cost slopes for activities A, B, C, D and F are calculated as: -2000 $/day , -1000 $/day, -1250 $/day, -2000 $/day, and -1000 $/day, respectively. Then, given any activity duration t, the resulting cost of the activity can be calculated as: Normal Cost + Cost of crashing the activity = Normal Cost Cost Slope x (Normal Time t) , or equivalently as: Full Crash Cost Savings due to not fully crashing = Crash Cost + Cost Slope x (t Crash Time). (Another equivalent activity cost expression could also be written by defining the activity cost as

Zero-duration cost Savings due to positive duration i.e., based on the intercept of the cost function along the vertical axis. However, all these versions amount up to the same cost.) Thus, the (direct) activity costs of the project are given by: For Activity A: 51,000 - 2000 (t A 18) , For Activity B: 9,000 1000 (t B 4) , For Activity C: 8,500 1250 (t C 5) , For Activity D: 8,000 2000 (t D 1) , and For Activity F: 5,500 1000 (t F 6) . Activity E has a fixed cost of $10,000, and activity G has a fixed cost of $12,000. Adding all these costs up, the total activity costs of the project can be written as: 104,000 + (36,000 + 4,000 + 6,250 + 2,000 + 6,000) - 2000 t A 1000 t B 1250 t C 2000 t D 1000 t F = 158,250 - 2000 t A 1000 t B 1250 t C 2000 t D 1000 t F . 2. Overhead Costs The total overhead costs that would be incurred throughout the project would be: 1200 E 6. 3. Penalties and rewards If E 6 turns out to be larger than the promised project duration of 36 days, then the quantity 1000 x (E 6 - 36) represents the penalty charges that will be levied. On the other hand, if E 6 turns out to be smaller than the promised project duration of 36 days, then the quantity 1000 x (36 - E 6) represents the rewards that will be received. This reward can be equivalently viewed as a reduction in costs. That is, the reward of 1000 x (36 - E 6) dollars is a (negative) cost of 1000 x (E 6 - 36) dollars. Thus, the simple, linear cost function 1000 x (E 6 - 36) is able to represent both any penalty costs that may be charged and any rewards that may be received, depending on whether E 6 turns out to be greater than or smaller than 36 days. 4. The objective function The goal of this SPM problem is to minimize the summation of all of these costs. Thus, adding all these costs up, the objective is to minimize: 158,250 - 2000 t A 1000 t B 1250 t C 2000 t D 1000 t F + 1200 E 6 + 1000 (E 6 - 36) = 122,250 - 2000 t A 1000 t B 1250 t C 2000 t D 1000 t F

+ 2200 E 6.

This completes the formulation of this CPM problem. Note that while thinking about and formulating the problem, visualizing the decisions first, the constraints next, and the objective function last facilitates reasoning through the problem. However, when the mathematical model of any problem is presented to others, we typically change this sequence: the objective is stated before the constraints subject to which the problem is to be solved. So, the formal presentation of this CPM problem would appear as follows: MATHEMATICAL MODEL OF THE EXAMPLE CPM PROBLEM:

Let:

t i = Duration of activity i, for i {A,B,,G};

E k = Start time of (any) activities following Node number k, for k = 0,1,2,,6.

minimize

122,250 - 2000

t A 1000 t B 1250 t C 2000 t D 1000 t F + 2200 E 6

subject to: E0= 0 E1 E0+ tA E2 E1+ tB E3 E1+ tC E3 E2+ tD E4 E3+ tE E5 E3+ tF E5 E4 E6 E5+ tG 18 t A 21 4 tB 5 5 t C 7 1 tD 2 tE = 5 6 tF 8 tG = 2 . (Some mathematicians or OR practitioners prefer to state the problem first and then define the variables used in the formulation. Obviously, I dont need to tell you my opinions about that.)

Solving the CPM problem

The mathematical model above has certain simplifying characteristics. In particular, both the objective function and the constraint functions are simple, linear functions of the decision variables. During the Second World War, Operations Researches have developed algorithms for solving such problems, and over the years, these algorithmes have been improved. These types of problems are referred to as Linear Programming (LP) problems. For a problem to be an LP problem: 1. All the decision variables must be beasurable as Real numbers (i.e., fractional values should be acceptable); 2. All the decision variables should assume only non-negative values; 3. The objective function, which is to be either minimized or maximized, must be a linear function of the decision variables, and 4. Each constraint function must be a linear function of the decision variables. In the Critical Path Management problem, the activity duration decisions (as well as the node arrival time decisions) are, of course, such real numbers. Time is infinitely divisible! They are, of course, also non-negative magnitudes. It doesnt even make sense to think about negative activity durations! So, all the above assumptions are satisfied. That is, the CPM model we have at hand is an LP problem. Thus, it can be easily solved by using the algorithms designed to solve LP problems. (One such algorithm is the so-called Simplex algorithm.)

Such algorithms are built into computer software, and are commercially available. Some LP software can solve LP problems with millions of decision variables and hundreds of thousands of constraints. Such high-power software are expensive, of course, their integration into a companys IT system costing possibly up to a few hundred thousand dollars. Some less capable software can handle problems with, say, up to 10,000 decision variables and 5,000 constraints. These software are available for a few thousand dollars. You can even find LP freeware on the Internet. These free versions are versions that can solve problems with up to just a few hundred variables, but are nevertheless very useful for instructional (or small business) uses. In this course, we will occasionally make use of one such LP software called LINDO.

USING LINDO:

As noted, there are many software that can solve LP problems. Well use the demo version of the LINDO software (freely downloaded from http://www.lindo.com) to solve this problem. This free demo version is able to solve only very small problems (with up to 150 constraints and 300 variables). The nice feature of LINDO is that an LP problem is input into LINDO almost exactly the way you would write the mathematical model on a piece of paper. Here are some basics: In LINDO, the objective function is either minimimized or maximized. You enter MIN to imply minimization, or MAX to imply maximization, at the very beginning of the objective function input line. LINDO does not accept any constant terms in the objective function. So, the constant 122,250 in the objective function of the CPM problem above would not be entered. This is not a disadvantage. In fact, we can easily prove that regardless of whether that constant term is taken into account or not, the same optimal values of the decision variables would be obtained. Constants make no difference in any optimization problem! LINDO uses only capital letters and numbers for decision variable names. Lower case characters are not allowed in naming variables. Also, subscripts or superscripts are not allowed. So, entering the variable E 3 into LINDO, you would actually type it in as E3. Also, entering large numbers, commas or periods should not be used to separate the thousands fields. The end of the objective function and the beginning of the constraints is signified by entering a line reading as SUBJECT TO (or as S.T. for short). The end of all the constraints is signified with the word END. To help explain your constraints, you can add comment lines to a LINDO formulation by using an exclamation mark at the beginning of the comment line. LINDO does not understand the relational symbols and . Instead, LINDO interprets the < symbol as meaning "less-than-or-equal-to" rather than "strictly less than". Similarly, the > sysmbol is interpreted as greater-than-or-equal-to. One may alternatively enter <= in place of the < character, or enter >= instead of the > character. LINDO expects to find only a linear fucntion of the decision variables on the lefthand-side (LHS) of a constraint. For instance, only one constraint can be entered on

each LINDO input line. That is, the two-sided constraint 18 t A 21 would be entered as the two separate constraints: TA >= 18 TA <= 21 . In addition, LINDO expects to find only a number on the right-hand-side (RHS) of a constraint function. So, you would enter the constraint X=2Y as X-2Y=0. Similarly, the constraint E 1 E 0 + t A would be entered as E1 - E0 TA >= 0. The contraints implying that each variable must be non-negative in any LP problem, are not explicitly entered into LINDO. LINDO assumes that all decision variables are non-negative. The LP model is input into a model window following the rules above. (A LINDO model window can be opened simply by selecting the menu items File > New from the menu line of LINDO.) Heres how the above CPM model could be input into LINDO: MIN - 2000 TA 1000 TB 1250 TC 2000 TD 1000 TF + 2200 E6

S.T. ! Network constraints E0 = 0 E1 - E0 TA >= 0 E2 - E1 TB >= 0 E3 - E1 TC >= 0 E3 - E2 TD >= 0 E4 - E3 TE >= 0 E5 - E3 TF >= 0 E5 - E4 >= 0 E6 - E5 TG >= 0 ! Activity duration constraints TA >= 18 TA <= 21 TB >= 4 TB <= 5 TC >= 5 TC <= 7 TD >= 1 TD <= 2 TE = 5 TF >= 6 TF <= 8 TG = 2 END Long input lines may be divided into several lines at the mathematical operation signs. Then, once the Solve command is selected from the menu line, such small problems are typically solved in less than 1 second. The solution of the problem is displayed on a separate solution window on the screen.

LINDO tries many alternative solutions (extreme points, for those of who have taken Operations Research or other optimization courses) before identifying the optimal solution. After the problem is solved, LINDO asks DO RANGE (SENSITITY) ANALYSIS? For the purposes of this course, you can answer this question as No. A small LINDO Solver Statuswindow will remain in front on your screen. Just close that window. The optimal solution calculated by LINDO appears on the solution window as: LP OPTIMUM FOUND AT STEP OBJECTIVE FUNCTION VALUE 1) 12850.00 12

The first line specifies how many alternative solutions were tried before concluding that the optimal one among all possible (feasible) solutions of the problem was identified. The next line (objective function value) shows the value of the objective function if the optimal values of the decision variables were plugged into it. In the following section of the output, three columns labeled as VARIABLE VALUE REDUCED COST appear. The first column lists all the decision variables used (in the sequence in which they were encountered in the user-input objective function and the constraint functions). The second column lists the optimal values of these variables at the optimal solution of the problem. (Forget about the Reduced Cost column. Thats not important for this course. It actually shows the reduction in the cost slopes thats needed before a correponding decision variable which appears to have a value of zero at the optimal solution - would appear at a strictly positive level in the optimal solution.) The following section of the LINDO output has three columns labeled as ROW SLACK OR SURPLUS DUAL PRICES . This information will not be needed in this introductory course at all. However, for the sake of completeness, we can briefly describe the meaning of each column. In the ROW column, sequential numbers 2,3,... would be shown. These row numbers refer to the seaparate constraints of the problem. Since LINDO treats the objective function as Row 1of the model, Row 2 corresponds to the first constraint, Row 3 corresponds to the second constraint, and so on. The SLACK OR SURPLUS data that appears next to a row indicates the overachievement or under-achievement levels of the corresponding constraint. Remember that constraints can be inequality of equality constraints. This column shows the difference between the LHS and the RHS of each constraint at the optimal solution. Finally, the DUAL PRICES data for each row shows the true economic value associated with relaxing the constraint corresponding to that row. The LINDO software (and the more general versions of this software marketed by the same company) are very commonly used in the industry.

SAMPLE PROBLEM 3: The table below shows the activities of a project and the durations of these activities. Some activities can be crashed and some can even be double crashed. Costs shown are in YTL. Times shown are in days. Assume that by allocating the proper amount of resources (costs) to an activity, an activity can be completed in any duration between its Normal Time and its fully crashed time.

ACTIVITY Prerequisites Q C J G A EE M B P X K L C C J,Q J M,A Q J,Q M P,B,G,EE EE G

NORMAL CRASH 1 CRASH 2 Time Cost Time Cost Time Cost 3 8,000 2.5 8,800 4 4,500 3 5,700 5 6,000 4 8,000 6 6,000 5 6,600 7 10,000 5 11,500 3 15,100 1 3,000 6.5 7,250 4 8,275 3 9,000 5 5,000 3 3,500 5 15,000 4 18,000 3.5 23,000 2 1,000 1 1,200 3 5,500 2 6,000 -

The contractor company is expected to incur an overhead cost of 1500 YTL/day until Activity A is completed, and an overhead cost of 850 YTL/day thereafter until the end of the project. Also assume that the contractor has promised to complete this project in 19 days. If they can not finish the project in 19 days, they will incur a penalty charge of 1000 YTL/day for every day they re late. But similarly, if they can complete the project faster than in 19 days, the cient will pay them a reward of 950 YTL/day for every day they are earlier than promised. 1. Draw the Activities-On-Arcs network diagram. (15 points... in an exam) 2. Assuming no activities are crashed, calculate the project completion time. Show all your work (ES and LS times for nodes) in detail. Identify the critical path(s). Calculate the cost of the project in this case (without any crashing). (8 pts... in an exam) 3. Now, assume all activities are fully crashed (i.e., crashed as much as possible), and calculate the project completion time. Show all your work (ES and LS times for nodes) in detail on a SEPARATE network diagram. Identify the critical path(s). Calculate the cost of the project in this case (with full crashing). (7 pts in an exam) 4. Now, formulate the optimal crashing strategy problem as a Linear Programming problem. In particular, - List and define every decision variable precisely, - Identify all your activity duration constraints and network constraints, and - Identify the objective function to be minimized. (20 pts in an exam) 5. Explain the optimal solution obtained by using LINDO. (10 pts in an exam.)

SAMPLE PROBLEM 4: The diagram above illustrates the interactions between OM and the different fields related to management, and shows examples of the flow of information between these fields.

Now that you have been exposed to the topic of Project Management, refine the type of interations that exists between Project Management and the other fields. Exactly what data or info would Project Managers need from (or transfer to) other management fields?

Solution to Sample Problem 1:

Solution to Sample Problem 2: