PERT AND CPM

Introduction:

In a large and complex project involving a number of interrelated activities, requiring a number of
men, machines and materials, it is not possible for the management to make an execute an optimum
schedule just by intuition based on the orgnisational capabilities and work experience.
Managements are, thus, always on the look out for some methods and techniques which may help
in planning, scheduling and controlling the project. A project may be defined as a combination of
interrelated activities which must be executed in certain order before the entire task can be
completed. The aim of planning is to develop a sequence of activities of the project, so that the
project completion time and cost are properly balanced and that the excessive demand of key
resources is avoided. To meet the object of system planning the managements have evolved a
number of techniques applying network strategies. PERT (programme evaluation review technique)
CPM (critical path method) are two of them which have been widely used for planning, scheduling,
and controlling the large and complex projects.

Historical background:

During world war I, Henry L. Gantt developed Gantt chart for production scheduling. It was later
modified to bar chart which was used as important tool in both the project and production
scheduling. In 1957, the network techniques of PERT and CPM were developed almost concurrently.
In the beginning CPM was used for planning and scheduling the constructional project. It was also
used for scheduling the maintenance shutdowns. The construction industry and petrochemical
industry were the major areas of CPM applications.

PERT was developed by U. S. Navy for scheduling the research and development work for the Polaris
missile programme, whose activities were subject to considerable degree of uncertainty. The
principal feature of PERT is that its activity time estimates are probabilistic. The activity times in CPM
applications were relatively less uncertain and were, thus, of deterministic nature.

Phases of project management:

1. Planning: The planning phase comprises of

- Setting the objectives of the project and the assumptions to be made.
- Development of work breakdown structure. Depending upon the objectives of the
management, the extent of control desired and the availability of computational aids,
the project is broken down into clearly definable activities.
- Establishing the activity durations, their resources requirements and costs, and
- Establishing the interdependence relationships between the activities.
2. Scheduling: it comprises of laying the activities according to the precedence order and
determining
- Start and finish time for each activity
- Critical path on which the activities require special attention, and
- Slack and float for non-critical paths.
3. Controlling: it is the follow up of planning and scheduling and involves
- Making periodical progress reports
- Reviewing the progress
- Analyzing the status of the project, and
- Management decisions regarding updating, crashing and resource allocation, etc.

Numbering the events (Fulkerson’s Rule):

After the network is drawn in a logical sequence, every event is assigned a number
which is placed inside the node circle. The number sequence should be such as to reflect
the flow of the network. the rule devised by D.R. Fulkerson is used for the purpose of
numbering. It involves the following steps.
1. The initial event which has all outgoing arrows with no incoming arrow is numbered
‘1’
2. Delete all the arrows coming out from node ‘1’. This will convert some more nodes
into initial events. Number these events 2,3
3. Delete all the arrows going out from these numbered events to create more initial
events. Assign the next numbers to these events.
4. Continue until the final and terminal node, which has all arrows coming in with no
arrow going out, is numbered.

Event:- an event represents the start or the completion of an activity.

Merge event:- when more than one activity comes and joins, the event is known as
merge event
Burst event:- when more than one activity leaves an event , the event is known as
burst event.
An activity may be a merge and burst event simultaneously as with respect to some
activities it can be a merge event, and event with respect to some other activities it
may be a burst event.
The beginning and ending points of an activity or a group of activities are called
events. Synonyms of an event are node and connectors. An event is often
represented graphically by a numbered circle, although any geometric figure such as
square, oval, rectangle etc. will serve the purpose. We shall however stick to the
most commonly used convention for representing an event i. e. the circle.
All activities in a network must commence from some event. Such events are called
the tail event because they are connected to tail of an activity. Similarly all activities
in a network must have terminal point called the head event.

Difference between PERT and CPM

PERT CPM
Meaning It is a project management It is a statistical technique
Technique, used to manage of project management that
Uncertain activities of a project manages well defined activities
for a project
what is it A technique of planning and A method to control cost and
control of time time
focus on Event Activity
model probabilistic model Deterministic model
Estimates Three time estimates One time estimates
Appropriate High precision time estimates Reasonable time estimates

Management of Unpredictable activities Predictable activities

Nature of job Non-repetitive nature Repetitive nature

 Suitable for Research and development Non-research like civil

DECISION TREE ANALYSIS

A decision is defined as the selection by the decision maker of an act , considered to be best according to some pre-designated
standard , from among the several available options.
Essential elements of decision making problem+
1. Courses of action- A decision is made from among a set of defined alternative course of action. These are also called
actions, acts or strategies and are under control and known to the decision maker.
2. State of nature – Consequences or events of any course of action are dependent upon certain factors beyond the control of
the decision maker.. These factors are called as state of nature.
3. Uncertainty – There is indefiniteness regarding which event or outcome will occur. This uncertainty is indicated in terms
of probabilities assigned to events.
4. Payoff – Each combination of course of action and an event is associated with payoff, which measures the net benefit to
the decision makers that accrues from a given combination of decision alternative and events. They are also known as
conditional profit values or conditional economic consequences.
Decision making environment-
Decision analysis is used to determine optimum strategies where a decision maker is faced with several decision
alternatives. He may come across several decision making situations:
1. Decision under certainty – Where there exists only one outcome for a decision, we are dealing with this
category
2. Decision under conflict – In many situations, neither state of nature are completely known nor are they
completely uncertain. Partial knowledge is available and therefore it may be termed as decision making under
Partial uncertainty.
3. Decision under uncertainty- These refer to situations where more than one outcome can result from any single
decision.
4. Decision under risk – These refer to decision under situations where in the decision makers chooses from
among several possible outcomes where probabilities of occurrence can be stated objectively from past data.
Decision tree-
It is a graphic display of various decision alternatives and the sequence of events as if they were branches of tree. In
constructing a tree diagram, it is convenient to use the “square” symbol to indicate the decision point and “circle” to
denote the situation of uncertainty or event. Branches coming out of a decision point are nothing but representation
of immediate mutually exclusive alternative options open to the decision makers. Branches emanating from the
event point represent all possible situations. These events are not fully under control of the decision maker and may
represent consumer demand etc. The basic advantage of a tree diagram is that another act subsequent to the
happening of each event may also be represented. The resulting outcome (payoff) for each act event combination
may be indicated in the tree diagram at the outer of each branch.
When probabilities of various events are known, they are written along the corresponding branches. Multiplying the
probabilities along the branches results in the joint probabilities for a corresponding act-event sequence. Thus in a
decision tree, the decision maker lists all possible alternatives, possible events and resulting payoff values along
with their probabilities for each act event sequence. This enable him to determine expected payoff values and hence
the EMV for each act.
S decision tree is highly useful to a decision maker in multistage situation which involves a series of decisions each
dependent on the preceding one. The modern approach to the analysis of a decision tree involves the computation of
EMV for each main branch of the tree. These values then become the conditional expected payoffs for their
respective bran; the process is repeated until the EMV for a given path has been determined. The optimal path
(strategy) is one that corresponds to the maximum EMV. This technique is called Rolling back technique.