MANU 3314

PROJECT & OPERATION MANAGEMENT

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LECTURE 6:
PROJECT CRASHING
(USING TIME COST TRADEOFF AND
USING LEAST COST METHOD)

Chapter 9: PROJECT MANAGEMENT: THE MANAGERIAL PROCESS

 CONSIDERING TIME-COST
TRADE-OFFS
PROJECT CRASHING

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 PROJECT CRASHING

Shortening of activity times,

by adding resources.

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 RATIONALE Time Is Money: COST-TIME
TRADEOFFS
FOR Reducing the time of a critical activity
REDUCING usually incurs additional direct costs.
▪ Cost-time solutions focus on reducing
(crashing) activities on the critical path to
PROJECT shorten overall duration of the project.

DURATION Reasons for imposed project duration

dates:
▪ Time-to-market pressures
▪ Unforeseen delays
▪ Incentive contracts (bonuses for early
completion)
▪ Imposed deadlines and contract
commitments
▪ Overhead and public goodwill costs
▪ Pressure to move resources to other
projects

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 OPTIONS FOR ACCELERATING
PROJECT COMPLETION
Resources Not Constrained Resources Constrained

▪Adding resources ▪Improving project team

▪Outsourcing project work efficiency
▪Scheduling overtime ▪Fast-tracking
▪Establishing a core project ▪Critical-chain
team ▪Reducing project scope
▪Do it twice—fast and then ▪Compromise quality
correctly

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 REDUCING PROJECT DURATION TO
REDUCE PROJECT COST
Identifying direct costs to reduce project time
Gather information about direct
and indirect costs of specific
project durations

Search critical activities for

lowest direct-cost activities to
shorten project duration

Compute total costs for specific

durations and compare to
benefits of reducing project time

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 EXPLANATION OF PROJECT COSTS

Project Indirect Costs

▪Costs that cannot be associated with any particular work
package or project activity
• Supervision, administration, consultants, and interest
•Costs that vary (increase) with time
• Reducing project time directly reduces indirect costs

Project Direct Costs

•Normal costs that can be assigned directly to a specific
work package or project activity
• Labor, materials, equipment, and subcontractors
•Crashing activities increases direct costs.

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 PROJECT COST–DURATION GRAPH

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 CONSTRUCTING A PROJECT
1
COST–DURATION GRAPH
▪ Find total direct costs for selected project
durations
▪ Find total indirect costs for selected project
durations
▪ Sum direct and indirect costs for these
selected project durations
▪ Compare additional cost alternatives for
benefits

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 CONSTRUCTING A
PROJECT COST–
DURATION GRAPH
2 - Normal time assumes
Determining Activities
to Shorten:
Shorten the activities with
the smallest increase in
cost per unit of time
`ATIAH ABDULLAH SIDEK
Assumptions:
- The cost-time relationship is
linear.
low-cost, efficient methods to
complete the activity.
- Crash time represents a
limit—the greatest time
reduction possible under
realistic conditions.
- Slope represents a constant
cost per unit of time.
- All accelerations must occur
within the normal and crash
times.
MANU 3314 PROJECT & OPERATION MANAGEMENT
 Activity Graph

COST SLOPE

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Project Cost
Resources
Activity
Times

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Example: Maintenance of Machine
Activity Description Immediate Time (days)
Predecessor
A Overhaul machine I - 7
B Adjust machine I A 3
C Overhaul machine II - 6
D Adjust machine II C 3
E Test system B,D 2

Mal Hamid now has to do maintenance

schedule for the machines that will be
used for the new product.
`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 Activity ES LS EF LF SLACK CP
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

Critical Path: A, B,E

Project Completion Time: 12 days

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity ES LS EF LF SLACK CP
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
Critical Path: A, B,E
Project Completion Time: 12 days

Suppose that completing the maintenance project

within 10 days imperative.

Help Mal reschedule the network using crashing method

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 Activity Time (days) Total Cost (S)
Normal Crash Normal Crash
Ci C’i
A 7 4 500 800
B 3 2 200 350
C 6 4 500 900
D 3 1 200 500
E 2 1 300 550
$1700 $3100

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 $
Crash
800
CC

Normal
500
NC
t
CT 4 NT 7
`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 1. Find CP in project network
CRASHING 2. Calculate crash cost per period
for all activities*
ACTIVITY 3. Select the activity on the critical
TIMES path with the smallest crash
cost per period and crash this
activity to the maximum extent
▪ How much each possible or to the point at
activity can be crashed which your desired deadline
has been reached.
▪ How much the 4. Check to be sure that the
crashing process costs critical path you were crashing
is still critical. If the critical path
is still the longest path through
the network, return to step 3. If
not, find the new critical path
and return to step 2.
`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 2 Calculate Crash Cost Per Period

Compute the crash cost per day(or other time

period) for all activities in the network.

COST SLOPE

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time (days) Total Cost (S)
Normal Crash Normal Crash
Ci C’i
A 7 4 500 800
B 3 2 200 350
C 6 4 500 900
D 3 1 200 500
E 2 1 300 550

Do the rest…

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time (days) Max Total Cost (S) Crash Cost
Normal Crash Reduction Normal C Crash per Day ($)
i
Time C’i
(days)
A 7 4 3 500 800 100
B 3 2 1 200 350 150
C 6 4 2 500 900 200
D 3 1 2 200 500 150
E 2 1 1 300 550 250

Which activities should be crashed—and by

how much—to meet the 10-day project
completion deadline at minimum cost?

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 3 Select Smallest Crash Cost Per
Period

Select the activity on the critical

path with the smallest crash cost

Activity
Times
per week

and CRASH this activity

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time (days) Max Total Cost (S) Crash Cost
Normal Crash Reduction Normal C Crash per Day ($)
i
Time C’i
(days)
A 7 4 3 500 800 100
B 3 2 1 200 350 150
C 6 4 2 500 900 200
D 3 1 2 200 500 150
E 2 1 1 300 550 250

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time (days) Max Total Cost (S) Crash Cost
Normal Crash Reduction Normal C Crash per Day ($)
i
Time C’i
(days)
A 7 4 3 500 800 100

Crash by 2 days (New NTA=5 days)

Cost increased $100 x 2= $200 (New NCA=RM700)

Current Completion Time: 12 days

Due Date: 10 days
New Completion Time: 10 days
Total budget will also increased by $200
`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 3 Check CP New Project Network

As you crash the current critical activities,

other paths may become critical.

Thus, you will need to check the critical path in the revised
network and perhaps either identify additional activities to
crash or modify your initial crashing decision

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 IMPORTANT
The following manual crashing method
is only suitable for
smaller network.

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 EXPLANATION OF PROJECT COSTS

Project Indirect Costs

▪Costs that involved with maintaining and running an
organisation. Not directly related to the development of
product/services of the organisation.
• Supervision, administration, consultants, and utilities etc
•Costs that vary (increase) with time
• Reducing project time directly reduces indirect costs

Project Direct Costs

•Normal costs that can be assigned directly to a specific
work package or project activity
• Labor, materials, equipment, and subcontractors etc
•Crashing activities increases direct costs.

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 PROJECT COST–DURATION GRAPH

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Example: Cost–Duration Trade-off
Mal Hamid now has to do determine the optimum cost-time
schedule for the project and the cost involved.
Activity Immediate Time (unit) Total Cost (S)
Predecessor Normal Crash Normal Ci Crash
C’i
A - 3 2 50 70
B A 6 4 80 160
C A 10 9 60 90
D A 11 7 50 150
E B 8 6 100 160
F C,D 5 4 40 70
G E,F 6 6 70 70
`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 B 3 9 E 9 17
6 5 11 8 11 19

A 0 3 C 3 13 G 19 25
Start End
3 0 3 10 4 14 6 19 25

F 14 19
5 14 19
D 3 14
11 3 14
Critical Path= A-D-F-G
Project Duration=25
Total Direct Cost=$450

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time (unit) Max Total Cost (S) Cost Slope
Normal Crash Reduction Normal C Crash
i
Time C’ i

A 3 2 1 50 70 20
B 6 4 2 80 160 40
C 10 9 1 60 90 30
D 11 7 4 50 150 25
E 8 6 2 100 160 30
F 5 4 1 40 70 30
G 6 6 0 70 70 0
Total Direct Cost= $ 450

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time Max Cost Slope
(unit) Reduction
Normal Time

A 3 1 20 Reduce Activity A one

B 6 2 40 time unit- and add $20 to
total direct costs
C 10 1 30
D 11 4 25
E 8 2 30
F 5 1 30
G 6 0 0
Total Direct Cost=$450

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time Max Cost Slope
(unit) Reduction
Normal Time
(unit)
Activity A=2x, ‘x’ meaning
A 2x 1 20 cannot be reduced any further
B 6 2 40
C 10 1 30
D 11 4 25
E 8 2 30
F 5 1 30
G 6 0 0
Total Direct Cost=$450+$20= $470

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 B E
6 8

A C G
Start End
2x 10 6

F
5
D
11
Critical Path= A-D-F-G
Duration=24
Total Direct Cost=$470

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time Max Cost Slope
(unit) Reduction
Normal Time
(unit)
A 2x 1 20
B 6 2 40
C 10 1 30
D 11 4 25 Reduce Activity D one
time unit- and add $25 to
E 8 2 30 total direct costs
F 5 1 30
G 6 0 0
Total Direct Cost=$470+$25= $495

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time Max Cost Slope
(unit) Reduction
Normal Time
(unit)
A 2x 1 20
B 6 2 40
C 10 1 30
D 10 4 25
E 8 2 30
F 5 1 30
G 6 0 0
Total Direct Cost=$470+$25= $495

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 B E
6 8

A C G
Start End
2x 10 6

F
5
D
10
Critical Path= A-D-F-G
and A-C-F-G
Duration=23
Total Direct Cost=$495

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Activity Time Max Cost Slope
(unit) Reduction
Normal Time
(unit)
A 2x 1 20
B 6 2 40
C 10 1 30
D 10 4 25
E 8 2 30
F 5 1 30 Reduce Activity F one
time unit- and add $30 to
G 6 0 0 total direct costs
Total Direct Cost=$495+$25= $525

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 B E
6 8

A C G
Start End
2x 10 6

F
4x
D
10
Critical Path= A-D-F-G and
A-C-F-G and A-B-E-G
Duration=22
Is further reduction possible? Total Direct Cost=$525
`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 B 2 8 E 8 16
6 2 8 8 8 16

A 0 2 C 2 12 G 16 22
Start End
2x 0 2 10 2 12 6 16 22

F 12 16
4x 12 16
D 2 12
10 10 12

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 B E
6 8

A C G
Start End
2x 10 6

D
10
Is further reduction possible?
Let us look at other possibility
`ATIAH ABDULLAH SIDEK
F
4x
Critical Path= A-D-F-G and
A-C-F-G and A-B-E-G
Duration=22
Total Direct Cost=$525
MANU 3314 PROJECT & OPERATION MANAGEMENT
 B E
6 8

A C G
Start End
2x 10 6

F
4x
D
10

Activity C-D-E will be working

simultaneously
`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT
 B E
6 7

A C G
Start End
2x 9x 6

F
4x
D
9
Duration=22-1=21
Total Direct Cost=$525 +
$30 +$25 +$30= $610

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Project Direct Cost + Indirect Costs = Total Costs
Duration (given)
25 450 400

24 470 350

23 495 300

22 525 250

21 610 200

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

 Project Direct Cost + Indirect Costs = Total Costs
Duration (given)
25 450 400 850

24 470 350 850

23 495 300 795

22 525 250 775

21 610 200 810

The optimum cost-time duration is 22

times unit with total cost of $775

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT

`ATIAH ABDULLAH SIDEK MANU 3314 PROJECT & OPERATION MANAGEMENT