UNIT TITLE: PROJECT SCHEDULING: PERT/CPM

TITLE OF THE LESSON:

Program Evaluation And Review Technique (PERT) And The Critical Path
Method (CPM)
Project Scheduling With Known Activity Times
Project Scheduling With Uncertain Activity Times
Considering Time-Cost Trade-Offs
Crashing Activity Times

DURATION: 6 hours

INTRODUCTION:
This lesson will discuss how project scheduling is being utilized by managers in
planning, scheduling, and controlling projects that are broken down into numerous
tasks assigned to a variety of departments and individuals in the organization. The
Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM)
will be thoroughly discussed in the following sections with specific examples so that
students will appreciate its application in a given problem.

OBJECTIVES/COMPETENCIES:
 Introduce the concept of networks and networking techniques as solution
models for complex scheduling project-scheduling problems.
 Show the use of CPM in the planning and control of projects.
 Examine situations which suggest the used of each technique.
 Demonstrate how to schedule projects involving resource limitations.

PRETEST:
Assess your level of knowledge in the following topics: Put a check (√) on the space
provided.
Topics High Moderate Low No Idea
Project scheduling
Strategic planning
Process flow chart
PERT
CPM

LESSON PROPER/COURSE:

PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT) AND THE CRITICAL

PATH METHOD (CPM)
PERT was developed in the late 1950s specifically for the Polaris missile project.
PERT was developed to handle uncertain activity times. CPM was developed primarily
for industrial projects for which activity times were known. CPM offered the option of
reducing activity times by adding more workers and/or resources, usually at an
increased cost. Thus, a distinguishing feature of CPM was that it identified trade-offs
between time and cost for various project activities.

PERT and CPM can be used to plan, schedule, and control a wide variety of projects:
1. Research and development of new products and processes
2. Construction of plants, buildings, and highways
3. Maintenance of large and complex equipment
4. Design and installation of new systems
Because projects may have as many as several thousand activities, project managers
look for procedures that will help them answer questions such as the following:
1. What is the total time to complete the project?
2. What are the scheduled start and finish dates for each specific activity?
3. Which activities are “critical” and must be completed exactly as scheduled to
keep the project on schedule?
4. How long can “noncritical” activities be delayed before they cause an increase
in the total project completion time?
PERT and CPM can help answer these questions.

PROJECT SCHEDULING WITH KNOWN ACTIVITY TIMES

Illustration:

Example 1:
The owner of the Jisoo Mall is planning to modernize and expand the current 32-
business shopping center complex. The project is expected to provide room for 8 to 10
new businesses. Financing has been arranged through a private investor. All that
remains is for the owner of the shopping center to plan, schedule, and complete the
expansion project. Let us show how PERT/CPM can help.

Step 1. Develop a list of the activities that make up the project.

Step 2. Determine the immediate predecessor(s) for each activity in the project.
Step 3. Estimate the completion time for each activity.

Table 4.1 List of Activities for Jisoo Mall

Activity Activity Description Immediate Activity
Predecessor Time
A Prepare architectural drawings — 5
B Identify potential new tenants — 6
C Develop prospectus for tenants A 4
D Select contractor A 3
E Prepare building permits A 1
F Obtain approval for building permits E 4
G Perform construction D,F 14
H Finalize contracts with tenants B,C 12
I Tenants move in G,H 2
TOTAL 51

Step 1 Step 2 Step 3

Step 4. Draw a project network depicting the activities and immediate predecessors
listed in steps 1 and 2.
 Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.1 Project Network For Jisoo Mall

Step 5. Use the project network and the activity time estimates to determine the
earliest start and the earliest finish time for each activity by making a forward pass
through the network. The earliest finish time for the last activity in the project identifies
the total time required to complete the project.

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.2 Jisoo Mall Project Network With Activity Times

Step 6. Use the project completion time identified in step 5 as the latest finish time for
the last activity and make a backward pass through the network to identify the latest
start and latest finish time for each activity.

Determining the Critical Path

EF = ES + t
Where:
ES = earliest start time for an activity
EF = earliest finish time for an activity
t = activity time
Earliest start time Earliest finish time

A 0 5
5
Node A: EF = ES + t = 0 + 5 = 5

The earliest start time for an activity is equal to the largest of the earliest finish times
for all its immediate predecessors.

Table 4.2 Computation Summary for Earliest Finish Time for Jisoo Mall
Node Earliest start time Earliest finish time
A 0 0+5=5
B 0 0+6=6
C 5 5+4=9
D 5 5+3=8
E 5 5+1=6
F 6 6 + 4 = 10
G 10 10 + 14 = 24
H 9 9 + 12 = 21
I 24 24 + 2 = 26

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.3 Jisoo Mall Project Network With Earliest Start
And Earliest Finish Times Shown For All Activities

Step 7. Use the difference between the latest start time and the earliest start time for
each activity to determine the slack for each activity.

Latest Start time LS = LF - t

The latest finish time for an activity is the smallest of the latest start times for all
activities that immediately follow the activity.

I 24 26
2 24 26

Latest start time Latest finish time

Table 4.3 Computation Summary for Latest Start Time for Jisoo Mall
 Node Latest start time Latest finish time
I 26 – 2 = 24 26
H 24 – 12 = 12 24
G 24 – 14 = 10 24
F 10 – 4 = 6 10
E 6–1=5 6
D 10 – 3 = 7 10
C 12 – 4 = 8 12
B 12 – 6 = 6 12
A 5–5=0 5

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.4 Jisoo Mall Project Network With Latest Start
And Latest Finish Times Shown For All Activities

Step 8. Find the activities with zero slack; these are the critical activities.

Slack = LS - ES = LF – EF

Table 4.4 Activity Schedule For Jisoo Mall

Activit Earliest Latest Earliest Latest Slack Critical
y Start Start Finish Finish (LS – ES) Path?
(ES) (LS) (EF) (LF)
A 0 0 5 5 0 Yes
B 0 6 6 12 6
C 5 8 9 12 3
D 5 7 8 10 2
E 5 5 6 6 0 Yes
F 6 6 10 10 0 Yes
G 10 10 24 24 0 Yes
H 9 12 21 24 3
I 24 24 26 26 0 Yes

Step 9. Use the information from steps 5 and 6 to develop the activity schedule for the
project.

The detailed schedule shown above indicates the slack or delay that can be tolerated
for the noncritical activities before these activities will increase project completion time.
PROJECT SCHEDULING WITH UNCERTAIN ACTIVITY TIMES

Example 2:
Red Velvet Company has manufactured industrial fans for many years. Recently, a
member of the company’s new-product research team submitted a report suggesting
that the company consider manufacturing a cordless industrial fan referred to as Fan-
Tay. The management wants to study the feasibility of manufacturing the Fan-Tay
product. The feasibility study will recommend the action to be taken. To complete this
study, information must be obtained from the firm’s research and development (R&D),
product testing, manufacturing, cost estimating, and market research groups. How
long will this feasibility study take?

Table 4.5 List of Activities for Fan-Tay

Activity Description Immediate
Predecessor
A Develop product design —
B Plan market research —
C Prepare routing (manufacturing engineering) A
D Build prototype model A
E Prepare marketing brochure A
F Prepare cost estimates (industrial engineering) C
G Do preliminary product testing D
H Complete market survey B,E
I Prepare pricing and forecast report H
J Prepare final report F,G,I

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.5 Fan-Tay Project Network

To incorporate uncertain activity times into the analysis, we need to obtain three time
estimates for each activity:

Optimistic time  = the minimum activity time if everything progresses ideally

Most probable time m = the most probable activity time under normal conditions
Pessimistic time b= the maximum activity time if significant delays are encountered

Table 4.6 Optimistic, Most Probable, And Pessimistic Activity Time

Estimates (In Weeks) For Fan-Tay
Activity Optimistic () Most probable (m) Pessimistic (b)
A 4 5 12
 B 1 1.5 5
C 2 3 4
D 3 4 11
E 2 3 4
F 1.5 2 2.5
G 1.5 3 4.5
H 2.5 3.5 7.5
I 1.5 2 2.5
J 1 2 3
Formula for expected time (t):
α + 4 m+b
t=
6

4+ 4 (5)+ 12 36
Activity A expected time=t A = = =6 weeks
6 6

With uncertain activity times, we can use the variance to describe the dispersion or
variation in the activity time values.
b−α 2
(
σ 2=
6 )
12−4 2 8 2
variance of Activity A=σ =
6
2
A=
6 (=1.78 ) ()

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.6 Activity Time Distribution For Product Design (Activity A) For Fan-Tay

Table 4.7 Expected Times And Variances For Fan-Tay

Activity Expected Time (weeks) Variance
A 6 1.78
B 2 0.44
C 3 0.11
D 5 1.78
E 3 0.11
F 2 0.03
 G 3 0.25
H 4 0.69
I 2 0.03
J 2 0.11
TOTAL 32

Proceeding with a forward pass through the network, we can establish the earliest
start (ES) and earliest finish (EF) times for each activity.

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.7 Fan-Tay Project Network With Earliest Start And Earliest Finish Times

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.8 Fan-Tay Project Network With Latest Start And Latest Finish Times

Table 4.8 Activity Schedule For Fan-Tay Fan-Tay

Activity Earliest Latest Earliest Latest Slack Critical
Start Start Finish Finish (LS – ES) Path?
(ES) (LS) (EF) (LF)
A 0 0 6 6 0 Yes
B 0 7 2 9 7
C 6 10 9 13 4
D 6 7 11 12 1
E 6 6 9 9 0 Yes
 F 9 13 11 15 4
G 11 12 14 15 1
H 9 9 13 13 0 Yes
I 13 13 15 15 0 Yes
J 15 15 17 17 0 Yes

Variability in Project Completion Time

We know that for Fan-Tay Fan-Tay, the critical path of A–E–H–I–J resulted in an
expected total project completion time of 17 weeks. However, variation in critical
activities can cause variation in the project completion time. However, if a noncritical
activity is delayed long enough to expend its slack time, it becomes part of a new
critical path and may affect the project completion time.

Expected Total Time of Critical Path=E (T )=t A + t E +t H +t I +t J

E(T )=6+ 4+3+ 2+ 2=17 weeks

Variance of Critical Path=σ 2=σ 2A + σ 2E +σ 2H + σ 2I +σ 2J

σ 2=1.78+0.11+0.69+ 0.03+0.11=2.72
2
Standard deviation=σ =√ σ = √ 2.72=1.65

Suppose that management allotted 20 weeks for the Fan-Tay Fan-Tay project. What is
the probability that we will meet the 20-week deadline?

If T = 20 weeks

T −E(T ) 20−17
z= z= =1.82 z=1.82= p=0.9656
σ 1.82

Source: Chapters 9 of Management Science: Quantitative Approach in Decision Making Anderson, D.R. et.al (2012)
Figure 4.9 Probability The Fan-Tay Will Meet The 20-Week Deadline

Calculations indicate an excellent chance that the project will be completed before the
20-week deadline.

CONSIDERING TIME-COST TRADE-OFFS

The original developers of CPM provided the project manager with the option of
adding
resources to selected activities to reduce project completion time. Added resources
(such as more workers, overtime, and so on) generally increase project costs, so the
decision to reduce activity times must take into consideration the additional cost
involved. In effect, the project manager must make a decision that involves trading
reduced activity time for additional project cost.

Illustration:

A two equipment for construction is consisting of five activities. The times for
construction activities are considered to be known; hence, a single time estimate is
given for each activity.

Table 4.9 Activity List for The Two Equipment

Activity Description Immediate Expected Time
Predecessor (days)
A Overhaul equipment A — 7
B Adjust equipment A A 3
C Overhaul equipment B — 6
D Adjust equipment B C 3
E Test system B,D 2

Table 4.10 Activity Schedule For The Two Equipment

Activity Earliest Latest Earliest Latest Slack Critical
Start Start Finish Finish (LS – ES) Path?
(ES) (LS) (EF) (LF)
A 0 0 7 7 0 Yes
B 7 7 10 10 0 Yes
C 0 1 6 7 1
D 6 7 9 10 1
E 10 10 12 12 0 Yes

Crashing Activity Times

Now suppose that current production levels make completing the construction within
10 days imperative. With the length of critical path of the network of 12 days, the
desired completion time is impossible unless we can shorten selected activity times.
This shortening of activity times is referred to as crashing.

To determine just where and how much to crash activity times, we need information on
how much each activity can be crashed and how much the crashing process costs.
Hence, we must ask for the following information:
1. Activity cost under the normal or expected activity time
2. Time to complete the activity under maximum crashing
3. Activity cost under maximum crashing

Let

T i = expected time for activity i

T 'i = time for activity i under maximum crashing
Mi = maximum possible reduction in time for activity i due to crashing

Given T i and T 'i, we can compute Mi. M i=T i−T 'i

Next, let Ci denote the cost for activity i under the normal or expected activity time and
C 'idenote the cost for activity i under maximum crashing. Thus, per unit of the crashing
cost Ki for each activity is;
C ' −Ci
K i= i
Mi

Table 4.11 Normal And Crash Activity Data For The Two Equipment
Maximum Crash Cost
Reduction per Day
Time (days) Total Cost C 'i−Ci
in Time
Activity K i=
(Mi) Mi
Cras
Normal Normal (Ci) Crash (Ci)
h
A 7 4 500 800 3 100
B 3 2 200 350 1 150
C 6 4 500 900 2 200
D 3 1 200 500 2 150
E 2 1 300 550 1 250
1700 3100

REFLECTION/LEARNING INSIGHTS:
In this lesson, it was showed how PERT/CPM can be utilized to plan, schedule, and
control numerous kinds of project of a firm. The students were taught of this approach
on how to develop project network that depicts the activities in the project and their
precedence relationships. Students are now knowledgeable on how to determine the
critical path on a certain network and determine the critical activities associated on the
identified path. Students are now knowledgeable on how to spot an activity schedule
showing the earliest and latest start, and earliest and latest finish times in a project.

OTHER PARTS:

Suggested Readings:
Chapters 9 of Management Science: Quantitative Approach in Decision Making
Anderson, D.R. et.al (2012)

Offline Supplementary Materials:

Video Recording Discussion saved in Google Class

References:
Levin R.I., Rubin, D.S., Stinson J.P., Gardner, E.S., (2001). Quantitative Approaches
to Management, Eight Edition. McGraw Hill.

Anderson, D.R., Sweeney, D.J., Williams, T.A., Camm, Martin, K., (2012). Introduction
to Management Science: Quantitative Approach in Decision Making, Revised
Thirteenth Edition. South-Western Cengage Learning.

Online Supplementary Materials:

Online Discussion via Google Meet.