OPERATIONS MANAGEMENT

ASSIGNMENT NO. 2 (2009-11 BATCH)

A) Your company has just received an order from a customer for a specially designed electric
motor. The contract stipulates that after 12 days (i.e. starting from the 13 th day), your firm will
experience a penalty of Rs. 1000 per day until the job is completed. Indirect project costs amount to Rs.
2000 per day. The data on direct costs and activity precedence relationship are given below.

ACTIVITY NORMAL TIME NORMAL COST CRASH TIME CRASH COST IMMEDIATE

(Days) (Rs.) (Days) (Rs.) PREDECESSOR

A 4 10,000 3 13,000 -

B 7 14,000 4 20,000 -

C 5 20,000 4 27,000 -

D 6 12,000 5 14,000 A

E 3 9,000 2 11,000 B

F 11 25,000 6 37,500 C

G 4 8,000 3 14,500 D, E

H 3 3,000 1 5,000 F, G

a) Draw the project network diagram.

b) What completion date would you recommend? What will be total project cost then?

PTO

SOLUTION 1:

Maximum crash time = Normal time-Crash time= 4 days – 3 days = 1 day

Crash cost per day = (Crash cost-Normal Cost) / (Normal Time-Crash time)
 = CC-NC / NT-CT

By putting the above formula for every activity we get;

ACTIVIT CRASH COST PER MAX. TIME

Y DAY REDUCTION
A 3000 1
B 2000 3
C 7000 1
D 2000 1
E 2000 1
F 2500 5
G 6500 1
H 1000 2

Here, the critical path is C-F-H at 19 days which is the longest path in the network. The cheapest of
these activities is to crash is H, which costs an extra of Rs1000 per day to crash.

By doing this, it saves Rs2000 + Rs1000 = Rs3000 per day in indirect and penalty costs.

Now, by crashing this activity by 2 days, the paths are now:

A-D-G-H: 15 days; B-E-G-H: 15 days; C-F-H: 17 days

The next cheapest critical activity to crash is F at Rs2500 per day. We can crash F to maximum 2 days
because we will have three critical paths. Further reductions in the project duration will require
simultaneous crashing of more than one activity (D, E, and F).

The cost to do so is Rs 6500. It exceeds the savings by Rs 3000. Therefore, we should stop.

A D

START B E H FINISH

C F

PROJECT COST ANALYSIS

 PROJECT
CRASH TIME PROJECT CRASH TOTAL TOTAL TOTAL
CRITICA DIRECT
STAGE ACTIVIT REDUCTIO DURATIO COST INDIREC PENALT PROJEC
L PATHS COSTS, LAST
Y N N ADDED T COST Y COST T COST
TRIAL
0 _ C-F-H _ 19 101000 _ 38000 7000 146000
1 H C-F-H 2 17 101000 2000 34000 5000 142000
2 F A-D-G-H 2 15 103000 5000 30000 3000 141000
    B-E-G-H              
    C-F-H              

B) Project manager of an advertising firm wants to develop the network diagram for a new
advertising campaign. She has gathered the following information for the various activities of the
project.

ACTIVITY OPTIMISTIC TIME MOST LIKELY PESSIMISTIC TIME IMMEDIATE

 (WEEK) TIME (WEEKS) (WEEKS) PREDECESSOR(S)

A 1 4 7 -

B 2 6 7 -

C 3 3 6 B

D 6 13 14 A

E 3 6 12 A, C

F 6 8 16 B

G 1 5 6 E, F

a) Calculate the expected time and variance for each activity.

b) Draw the network diagram.

c) Calculate the activity slacks (total and free) and determine the critical path, using the slack
information.

d) What is the probability of completing the project in 23 weeks?

(TO BE SUBMITTED BY EACH STUDENT INDIVIDUALL LATEST BY JANUARY 6, 2010)

NOTE:

Brief and specific answers with neat diagrams will be appreciated and rewarded.

a) Calculate the expected time and variance for each activity.

Solution: 2

a). We know that,

EXPECTED TIME (ET) = (a+ 4 m+b) ÷ 6

Where; a= Optimistic Time (Week)

m= Most Likely Time (Weeks)

b= Pessimistic Time (Weeks)

ACTIVITY VARIANCE (σ²) = [(b-a)/6]²

Where; a = Optimistic Time (Week) and b = Pessimistic Time (Weeks)

ACTIVITY EXPECTED TIME ACTIVITY VARIANCE

(a + 4m + b)/6 [(b-a)/6]²

A 4.0 1.0

B 5.5 0.69

C 3.5 0.25

D 12.0 1.78

E 6.5 2.25

F 9.0 2.78

G 4.5 0.69

b) Draw the network diagram.

Solution: Network Diagram:

A D

START FINISH
 B C E

G
F

FINISH
1 D

A Dummy

3 G
START
C E

B
2 4
F

c) Calculate the activity slacks (total and free) and determine the critical path, using the slack
information.

Solution:
Activity Slack (Total and Free):

Note: For each activity in the project, we calculate four points in time: the early start, early finish, late
start and late finish time.

The early start and early finish are the earliest times that the activity can start and be finished. Similarly,
the late start and late finish are the latest times that the activities can start and be finished.

The difference between the late start time and early start time is called the slack time.

So, we need to calculate the Earliest Start, Latest Start, Earliest Finish and Latest Finish times for each
activity. Starting from activities A and B we proceed to the end of the network and calculate earliest
start and finish times.

ACTIVITY EXPECTED TIME EARLIEST START (week) EARLIEST FINISH (week)

A 4.0 0 0 + 4.0 = 4.0

B 5.5 0 0 + 5.5 = 5.5

C 3.5 5.5 5.5 + 3.5 = 9.0

D 12.0 4.0 4.0 + 12.0 = 16.0

E 6.5 9.0 9.0 + 6.5 = 15.5

F 9.0 5.5 5.5 + 9.0 = 14.5

G 4.5 15.5 15.5 + 4.5 = 20.0

Now, we can conclude that the earliest finish time is 20 week, when activity G is completed.

ACTIVITY LATEST START (week) LATEST FINISH (week)

G 15.5 20.0

F 6.5 15.5

E 9.0 15.5

D 8.0 20.0

C 5.5 9.0

B 0.0 5.5
A 4.0 8.0

Now we can easily calculate the activity slacks and determine which activities are on the critical path.

ACTIVITY EARLIEST LATEST EARLIEST LATEST ACTIVITY

CRITICAL PATH

START START FINISH FINISH SLACK

A 0.0 4.0 4.0 8.0 4.0 NO

B 0.0 0.0 5.5 5.5 0.0 YES

C 5.5 5.5 9.0 9.0 0.0 YES

D 4.0 8.0 16.0 20.0 4.0 NO

E 9.0 9.0 15.5 15.5 0.0 YES

F 5.5 4.5 14.5 15.5 1.0 NO

G 15.5 15.5 20.0 20.0 0.0 YES

Now, the paths and their total expected times and variances, are

PATH TOTAL EXPECTED TIME TOTAL VARIANCE

A–D 4 + 12 = 16 1.00 + 1.78 = 2.78

A–E–G 4 + 6.5 + 4.5 = 15 1.00 + 2.25 + 0.69 = 3.94

B–C–E–G 5.5 + 3.5 + 6.5 + 4.5 = 20 0.69 + 0.25 + 2.25 + 0.69 = 3.88

B–F–G 5.5 + 9 + 4.5 = 19 0.69 + 2.78 + 0.69 = 4.16

Therefore, the critical path is B – C – E – G, with a total expected time of 20 weeks.

d) What is the probability of completing the project in 23 weeks?

Solution: To calculate the probability, we first need to calculate the z-value:

z=D−Tϵ ÷

= (23 – 20)/ √3.88

= 1.52

Now, by using the Normal Distribution Table, we can find that the probability of completing the project
in 23 weeks is 0.4357.