COMPARISON OF CPM & PERT

Sl. CPM PERT

No

A probabilistic model with uncertainty A

A deterministic model with well-known
deterministic model with well-known activity in
activity (single) times based upon past
1 activity duration. Expected time is (single) times
experience. It assumes that, the expected
based upon past experience, calculated from to, tm
time is actually the time taken.
and tp.

2 An activity-oriented system. An event-oriented approach.

CPM terminology employs words like PERT terminology uses words like network
3
arrow diagram, nodes and float. diagram, events, and slack.
The use of dummy activities is not
The use of dummy activities is required for
4 necessary. The arrow diagram thus
representing the proper sequencing.
becomes slightly simpler.
PERT basically does not demarcate between
5 CPM marks critical activities.
critical and non-critical activities.

CPM is employed to those projects

PERT finds applications in projects where
where minimum overall costs is of
6 resources (men, materials and specially money)
primary importance. There is better
are always made available as and when required.
utilization of resources.

Suitable for problems in Industrial

Especially suitable in defense projects and R & D
7 setting, plant maintenance, civil
where activity times cannot be reliably predicted.
construction projects, etc.

Advantages of Network Technique

1. Detailed and thoughtful planning provides better analysis and logical thinking.
2. Identifies the critical activities and focus them to provide greater managerial attention.
3. Network technique enables to forecast project duration more accurately.
4. It is a powerful tool for optimisation of resources by using the concept of slack.
5. It provides a scientific basis for monitoring, review and control, to evaluate effect of
slippages.
6. It helps in taking decision;
 (i) To over-come delays,
(ii) To crashing programme,
(iii) Optimising resources, and
(iv) On other corrective actions.
7. It helps in getting better co-ordination amongst related fields.
8. It is an effective management tool through a common and simple language, providing
common understanding.

Limitations of Network Techniques

(i) Network technique is simply a tool to help the management; hence its effectiveness
depends on how well it is used by the management.
(ii) Its accuracy depends on the estimation of the data used in the network.
(iii) It is useful only if it is updated regularly and decisions for corrective actions are taken
timely.

TIME-COST TRADE OFF ANALYSIS

CPM/PERT in a network determines that sequence of activities which requires maximum

normal time for the completion of the work i.e. with the available resources the operation of
the events/ activities lying on the critical path cannot be performed in les8 than the required
time. But very organisation wants to reduce the target time so that the surplus/saved time can
be used for extra work by sending extra resources.

Furthermore, every enterprise wants to accomplish the desired objective at minimum cost also.
Sometimes it may be desirable to extend the project duration if there is considerable saving in
costs. Thus time- cost relationship is of great significance in project management.

The project cost consist of both direct and indirect costs, direct costs are related with the
duration of the activities and include costs on inputs to perform that activity. Indirect costs
include overhead costs, the specified date.

The duration of the project can be shortened by systematic analysis of Critical Path activities,
crashing costs and corresponding costs and corresponding affect of indirect costs. For this time-
cost relationship should be critically examined.

The relationship can be studied with the help of the following costs and time values:
(i) Normal Time: Normal time is the standard time that an estimator would usually allow
for an activity.
(ii) Normal Cost: This is the direct cost required to complete the activity in normal time
duration.
(iii) Crash Cost and Time: The normal time of an activity can be reduced by incurring
additional cost. The additional cost may be due to hiring additional personnel,
machinery, working overtime etc. this reduction is termed as 'Crashing'. However, there
is a minimum time beyond which as activity time cannot be crashed, even by incurring
 additional cost. This time is known as 'Crash time' and the direct cost corresponding to
it as 'Crash cost'.

(iv) Project Normal cost/time: The sum of the normal costs of all activities of the project
is known as Project Normal cost and the sum of the normal times of activities in the
critical path of the project is known as Project Normal time.

(v) Optimal Project duration: The optimal project duration is the one which results in
minimum overall cost. This is determined from the normal cost of each activity, normal
duration, the cost of crashing, the extent to which it can be crashed and the indirect
costs per unit time of project duration. Beyond the optimal project duration, it is not
economical to reduce the duration.
(vi) Activity Cost slope: The cost slop indicates the additional cost incurred per unit of time
saved in reducing the duration.

Crashing of project network

The normal time of a project duration is the total duration of all critical activities together (i.e.
critical path duration). The reduction in the project duration can be achieved by reducing time
required for selected activities, from their normal time. The maximum reduction in time
possible for any activity is limited to its crash time (i.e. beyond this time, reduction is not
possible). The process of reducing the total project duration by reducing activity timings is
known as crashing of project network.

Time-Cost optimization procedure (procedure for crashing)

1. Find the critical path and identify the critical activities.
2. Calculate the cost slopes for different activities by using the formula:

Cost Slope = (Crash cost - Normal cost)/ (Normal time -

Crash time)
3. Rank the activities in the ascending order of cost slope.
4. Crash the activities in the critical path as per the ranking, i.e. activity having lower cost
slope would be crashed first to the maximum extent possible. Calculate the new direct
cost by adding the cost of crashing to the normal cost.
5. As the critical path duration is reduced by the crashing as per step 3, other paths also
become critical, i.e. we get parallel critical paths. This means that project duration can
be reduced by simultaneous crashing of activities in the parallel critical paths.
6. By crashing as per step 3 and step 4, one reaches a point when further crashing is either
not possible or does not result in the reduction of crashing of project duration. (This can
happen when activities which can be crashed lie in the non-critical path). For the
different project duration total cost is found out. Total cost is got by adding
corresponding fixed overhead cost to the direct cost and the direct cost is got h adding
the crashing cost cumulatively to the normal cost