Worksheet: 5

Time-Cost Trade-off

1 Safdarjung Hospital
The administration of the Safdarjung Hospital had committed itself to intro-
duce a new diagnostic procedure in the clinic. This procedure required the
acquisition, installation, and introduction of a new medical instrument. Dr.
S.K. Singh was assigned the responsibility for assuring that the introduction
be performed as quickly and smoothly as possible.
Dr. Singh created a list of activities that would have to be completed before
the new service could begin. Initially, three individual steps had to be taken:
(1) write instructions and procedures, (2) select techniques to operate the
equipment, and (3) procure the equipment. The instructions and selection
of the operators had to be completed before the training could commence.
Dr. Singh also believed it was necessary to choose the operators and eval-
uate their qualifications before formally announcing the new service to the
local medical community. Upon arrival and installation of the equipment and
completion of the operators’ training, Dr. Singh wanted to spend a period
checking out the procedures, operators, and equipment before declaring that
the project was successfully completed. The activities and times are listed
in the following Table.
Dr. N Chandra, a member of the Hospital staff, reported that it would be
possible to save time on the project by paying some premiums to complete
certain activities faster than the normal schedule listed in the Table. Specif-
ically, if the equipment were shipped by express courier, one week could be
saved. Air freight would save two weeks. However, a premium of | 20,000
would be paid for the express courier shipment and | 75,000 would be paid
for air shipment. The operator training period could also be reduced by one
week if the trainees worked overtime. However, this would cost the hospital
an additional | 60,000. The time required to complete the instructions could
be reduced by one week with the additional expenditure of | 40,000. How-
ever, | 30,000 could be saved if this activity was allowed to take three weeks.

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 Duration Immediate
Activity Description
(weeks) predecessor
A Write instructions 2 -
B Select operators 4 -
C Train operators 3 A, B
D Announce new service 4 B
Purchase, ship, and receive
E 8 -
equipment
Test new operators on
F 2 C, E
equipment

Table 1: Safdarjung Hospital new Diagnostic service

1. What is the shortest time period in which the project can be completed
using the expected times listed in the Table?

2. What is the shortest time in which the project can be completed if

extra money is used to reduce the times for certain activities?

3. What is the lowest cost schedule for this shortest time?

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2 MasterBoy
As a project director at Innovate and Design Institute you have the respon-
sibility for the development of a new series of advanced intelligent robots
called MasterBoy. Based on a preliminary idea top management has given
you green light to a more thorough feasibility study. As the robot should be
ready before the next financial year, you have been asked to investigate if
you can finish the project within 30 weeks.
The tasks that needs to be carried out during the project is broken down
into a set of individual “atomic” tasks called activities. For each activity we
need to know the duration of the activity and its immediate predecessors.
For the MasterBoy project the activities and their data can be seen in the
following Table.

Immediate
Activity Description Duration
predecessor
A Product design – 10
B Market research – 4
C Production analysis A 8
D Product model A 6
E Marketing material A 6
F Cost analysis C 5
G Product testing D 4
H Sales training B, E 7
I Pricing F, H 2
J Project report F, G, I 3

Table 2: Activities in project MasterBoy

1. Draw a project network diagram for the project. Find earliest and
latest start and finish times. Which activities are on a critical path?
2. Top management reviews our project plan and comes up with a of-
fer. They think 28 weeks will make the product available very late
in comparison with the main competitors. They offer an incentive of
| 40,00,000 if the project can be finished in 25 weeks or earlier. Quickly
you evaluate every activity in the project to estimate the cost of crash-
ing and by how much we can crash each of the activities. The numbers
for the project is shown in the following Table. What is the cheapest
way of reducing the project duration to 25 weeks and how? Do we take
the offer by the management?

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3. Assume that the incentive scheme set forward by the top management
instead of giving a fixed date and a bonus specified a daily bonus.
Suppose that we will get | 8,50,000 for each week we reduce the project
length. What is the optimal project duration? Construct the project
crashing curve that presents the relationship between project length
and the cost of crashing until the project is crashed by 4 weeks.

Duration
Activity
(normal)
A 10
B 4
C 8
D 6
E 6
F 5
G 4
H 7
I 2
J 3
Unit
Duration
Crashing
(crashing)
cost
7 | 8,00,000
3 | 4,00,000
7 | 9,00,000
4 | 16,00,000
3 | 11,00,000
3 | 6,00,000
3 | 7,00,000
3 | 5,00,000
2 -
2 | 9,00,000

Table 3: Crashing activities in project MasterBoy