OPIM101 9 Updated

SMU Classification: Restricted
Project Management
Decision Analysis
OPIM 101
Liang Xu
Assistant Professor of Operations Management
leonxu@smu.edu.sg
Office: 4031
Decision Analysis – OPIM 101 1

Week 9
Project Management
Class Outline
Project Management
- Elements in Project Managements
- Project Scheduling:
- Critical Path Method & Sensitivity Analysis
- Linear Programming Method
- Project Crashing

Week 9
Project Management
Learning Objectives
Project Management
- Understand how to plan, monitor and control projects
- Understand how to determine the total project completion time
with individual activity characteristics
- Understand how to use LP for project management

Week 9
Project Management
Project Management
- One-fifth of the world’s economic activity is organized as a
project, with an annual value of US$12,000,000,000,000.
- The expected number of new jobs globally in project

management between now and 2020 is 15,700,000.
[Project Management Institute report, 2013]
- 90% of global senior executives rank project management

methods as critical to remaining competitive

Week 9
Project Management
Some Famous Examples

- The Sydney Opera House was planned in 1957 for a 1963 opening and a
construction cost of $7m.
- Disputes between the architect, engineers, construction company, and city
managers, complicated by the highly innovative design, caused big delays
and cost overruns.
- It was eventually opened in 1973 (10 years late) at a cost of $102m
(almost 14 times over budget).
Of course, as an architectural masterpiece and an

iconic landmark for Australia, it’s a great success.
https://www.youtube.com/watch?v=u2bBGvuWqY8
Week 9
Project Management
Some Famous Examples

Sagrada Familia:
The first stone was laid on 19 March, 1882
Since Antoni Gaudí (1852–1926), there

have been six other chief architects.
Current chief architect Jordi Fauli said it is on track to complete in 2026 to

coincide with the centenary of Gaudi's death:
"It's difficult to predict but we can say that it will be completed by 2030, 2032."

Week 9
Project Management
Project Management: Practice

- Project team (Who)
- Project planning
• define project objectives
• identify activities
• establish precedence relationships to be
discussed
• make time estimates
• determine project completion time
• compare project schedule objectives
– Project Control (Application)
Week 9
Project Management
Project Scheduling
Typical Questions Project Manager needs to know:
1. What is the total time required to complete the project?
2. What are the start and finish dates for the specific activity?
3. Which activities are “critical” and must be completed exactly
as scheduled to keep the project on schedule?
4. How long can “non-critical” activities be delayed before they
cause a delay in the total project?

Week 9
Project Management
Project Scheduling
Successfully completing a project requires:
Knowledge of the tasks involved
Accurate estimates of time and resources required
Knowledge of physical and logical relations between the
various tasks
Project scheduling techniques:
Critical Path Method (CPM)
Linear Programming Formulation

Week 9
Project Management
Class Outline
Project Management
- Project Crashing

Week 9
Project Management
Vaccine X Development
Vaccine X is in the last phase of clinical development, consisting
of three human studies of 3, 6 and 18 months respectively.
The managers estimate that it will take 3 months to analyze
the results before submitting the drug for approval to the FDA.
The FDA takes up to 12 months to review the drug. Building
the factory takes 24 months. Building a sufficient inventory to
ship to the wholesale vendors prior to launch takes 6 months.
The initial marketing campaign (8 months) to doctors can start
as soon as the results are analyzed and should be completed
by product launch.

Week 9
Project Management
Vaccine and Drug Development

Week 9
Project Management
Bill Gates is able

—and willing—to
lose big money
funding factories
for COVID-19
vaccines
Through the Bill and Melinda Gates Foundation, the billionaire Microsoft

founder and philanthropist plans to help fund factories for seven promising
vaccines, even before seeing conclusive data. That's despite the fact that two
of the programs—at most—will make it through to final development and
deployment.

Week 9
Project Management
Timeline with dependence
Activity Immediate Predecessors Duration (month)
3-month study - 3
6-month study - 6
18-month study - 18
Result analysis 3-, 6-, 18- month study 3
FDA Result analysis 12
Marketing Result analysis 8
Factory building - 24
Inventory Factory building 6
Launch FDA, Inventory, Marketing -

Week 9
Project Management
Project Activity Network

Graphical representation of project
A is a predecessor of B ↔ B is a successor of A. Then, B
cannot start before A is finished:
A B
Insert “Start” node as first project activity

Insert “End” node as last project activity

Week 9
Project Management
Exercise:
Draw the Project Activity Network
For Vaccine X Development

Week 9
Project Management
3-month study FDA
Start 6-month study Result Analysis Launch
18-month study Marketing
Factory build Inventory
Insert “Start” node as first project activity

Insert “End” node as last project activity (No need in this case)
Week 9
Project Management
Critical Path Method: CPM

Project scheduling
How long does it take to complete the project?
When should each individual task be scheduled?
CPM:
Longest time path through project network
Critical path determines project length
Delay in critical activities delays entire project

Week 9
Project Management
Critical Path Method: Steps

1. Schedule the project from start (FORWARD):
- For each activity, find early start (ES) and early finish (EF)
- ES: earliest time at which an activity can be started: As

soon as all the predecessors are finished
- EF: ES plus the time required to perform the activity

Week 9
Project Management

2. Schedule the project from end (BACKWARD):
- For each activity, find late start (LS) and late finish (LF)
- The latest finish time (LF) for the final activity in a project is
equal to its EF as determined by the forward pass.
- The LF for any other activity is equal to the earliest (or
minimum) LS of the activities directly following (or
succeeding) it.
- The LS of an activity is equal to its LF minus the time
required to perform the activity.

Week 9
Project Management
Information at Each Activity Node

i = activity ti = time required to
perform activity i
ESi EFi
ESi = earliest LSi = latest possible

possible start time i ti start time for activity
for activity i i
LSi LFi
EFi = earliest LFi = latest possible
possible finish time finish time for
for activity i activity i

Week 9
Project Management
Information at Each Activity Node
ESi EFi
ESi = earliest LSi = latest possible
possible start time start time for activity
for activity i i
EFi = earliest LSi LFi LFi = latest possible

possible finish time finish time for
for activity i activity i

Week 9
Project Management
ES EF
LS LF CPM Forward
0 3 21 33
0 6 18 21 33 33
3-month study FDA
21 29
0 0 18-month study Marketing
0 18 Factory build Inventory
0 24 24 30

Week 9
Project Management

Procedure for obtaining ES for all activities:
1. For each activity that starts the project (including the start node), set
its ES = 0.
2. For each activity whose ES has just been obtained, calculate EF =
ES + duration.
3. For each new activity whose immediate predecessors now have EF
values, calculate its ES as the maximum (latest) EF of its
immediate predecessors (earliest start time rule). Apply step 2 to
calculate EF.
4. Repeat step 3 until ES and EF have been obtained for all activities.

Week 9
Project Management
ES EF
LS LF CPM Forward
0 3 21 33
0 6 18 21 33 33
3-month study FDA
21 29
0 24 24 30

Week 9
Project Management
Project Scheduling
Typical Questions Project Manager needs to know:
1. What is the total time required to complete the project?
2. What are the start and finish dates for the specific activity?
3. Which activities are “critical” and must be completed exactly
as scheduled to keep the project on schedule?
4. How long can “non-critical” activities be delayed before they
cause a delay in the total project?
To answer the last two questions, we need the backward pass.
Week 9
Project Management
ES EF
LS LF CPM Backward
0 3 21 33
15 18 21 33
0 6 18 21 33 33
12 18 3-month study 18 21 FDA 33 33
21 29
25 33
0 0
0 18
0 24 24 30
3 27 27 33

Week 9
Project Management

Procedure for obtaining LF for all activities:
1. For each of the activities that together complete the project
(including the finish node), set LF equal to EF of the finish node.
2. For each activity whose LF value has just been obtained, calculate
LS = LF – duration.
3. For each new activity whose immediate successors now have LS
values, calculate its LF as the minimum (earliest) LS of its
immediate successors (latest finish time rule). Apply step 2 to
calculate its LS.
4. Repeat step 3 until LF and LS have been obtained for all activities.

Week 9
Project Management
ES EF
LS LF CPM Backward
0 3 21 33
15 18 21 33
0 6 18 21 33 33
12 18 3-month study 18 21 FDA 33 33
21 29
25 33
0 0
0 18
0 24 24 30
3 27 27 33

Week 9
Project Management
Critical Path
Total Slack of an activity: LS – ES = LF – EF
The extra time that could be made available to an activity
without delaying the project (i.e., without affecting the
minimum project completion time) given that all the other
parameters remain unchanged.
Total slack = 0: critical activity
Total slack > 0: non-critical activity

Week 9
Project Management
ES EF
LS LF Total Slack
0 3 21 33
15 18 21 33
0 6 18 21 33 33
12 18 3-month study 18 21 FDA 33 33
21 29
25 33
0 0
0 18
0 24 24 30
3 27 27 33

Week 9
Project Management
Activity Total Slack
3-month study 15
6-month study 12
18-month study 0
Result analysis 0
FDA 0
Factory building 3
Inventory 3
Marketing 4

Week 9
Project Management
Critical Path
- Critical path(s)
The sequence(s) of critical activities from “Start” to “End”
It is possible to have multiple critical paths

Week 9
Project Management
Activity Total Slack
3-month study 15
6-month study 12
18-month study 0
Result analysis 0
FDA 0
Factory building 3
Inventory 3
Marketing 4

Week 9
Project Management
Activity Critical? Total Slack
3-month study No 15
6-month study No 12
18-month study Yes 0
Result analysis Yes 0
FDA Yes 0
Factory building No 3
Inventory No 3
Marketing No 4

Week 9
Project Management
ES EF
LS LF Critical Path
0 3 21 33
15 18 21 33
0 6 18 21 33 33
12 18 3-month study 18 21 FDA 33 33
21 29
25 33
0 0
0 18
0 24 24 30
3 27 27 33

Week 9
Project Management
Free Slack of an Activity

Free Slack: Total time that activity can be delayed without
affecting the earliest start time of any of its successors
Free Slack of an activity: min(ES of all successors) – EF of that

activity

Week 9
Project Management
Activity Critical? Total Slack Free Slack
3-month study No 15 15
6-month study No 12 12
18-month study Yes 0 0
Result analysis Yes 0 0
FDA Yes 0 0
Factory building No 3 0
Inventory No 3 3
Marketing No 4 4

Week 9
Project Management
Free Slack of an Activity

Free Slack: Total time that activity can be delayed without
affecting the earliest start time of any of its successors
Free Slack of an activity: min(ES of all successors) – EF of that

activity
Total Slack ≥ Free Slack
If the start of any of its successors are not affected, then the
project completion time is also not affected.
Total slack = 0 → Free slack = 0
Week 9
Project Management
Sensitivity Analysis
What if duration of a non-critical activity decreases?
What if duration of a critical activity increases?
What if duration of a non-critical activity increases?
What is duration of a critical activity decreases?
Need to discuss the impact on BOTH project completion time

and critical path

Week 9
Project Management
Suppose result analysis actually takes 4 months instead of 3
months (1-month delay). What is the impact on the project?

Week 9
Project Management
Suppose result analysis actually takes 4 months instead of 3
months (1-month delay). What is the impact on the project?
Result analysis is a critical activity, so the minimum project

completion time will increase by 1 month, and the critical path
remains the same.
If critical activity takes additional months, then the

minimum months
Week 9
Project Management
Suppose building factory actually takes 26 months instead of
24 months (2-month delay). What is the impact on the
project?

Week 9
Project Management
project?
Building factory is a non-critical activity, and the delay (2 months)
is less than its total slack (3 months), so there is no change in
the minimum project completion time and the critical path.
Non-critical activity with delay <= total slack

the minimum remains the same
Week 9
Project Management
project?

Week 9
Project Management
project?
Building factory is a non-critical activity, but the delay (4 months)

is more than its total slack (3 months), so the minimum project
completion time will increase by 1 month and the new critical
path(s) will include building factory.

Week 9
Project Management
24 months (4-month early finish). What is the impact on the
project?

Week 9
Project Management
24 months (4-month early finish). What is the impact on the
project?
Building factory is a non-critical activity, finishing it early does not
change the minimum project completion time. The critical path
does not change either.
Non-critical activity has shorter duration

No change to the minimum

Week 9
Project Management
Suppose 18-months study takes 17 months instead of 18
months (1-month early finish). What is the impact on the
project?

Week 9
Project Management
project?
18-month study is a critical activity. The minimum project
completion time will decrease by 1 month and critical path does
not change.

Week 9
Project Management
project?

Week 9
Project Management
project?
18-month study is a critical activity. The minimum project
completion time will only decrease by 3 months because factory
building will become critical. Critical path now involves factory
building instead of 18-months study.
Critical activity has shorter duration Shorter (but not
necessarily exactly the same amount) minimum project
completion time if there is a single critical path
Week 9
Project Management
CPM Summary
1. Determine the sequence of activities (develop work
breakdown structure).
2. Construct the network or precedence diagram.
3. Starting from the beginning, compute the Early Start (ES)
and Early Finish (EF) time for each activity. ES of an
activity = maximum(EF of all its immediate predecessors)
4. Starting from the end, compute the Late Finish (LF) and
Late Start (LS) time for each activity. LF of an activity =
minimum (LS of all its immediate successors)
5. Find the total slack for each activity.
6. Identify the Critical Path.
Week 9
Project Management
Class Outline
Project Management
- Project Crashing

Week 9
Project Management
Project Scheduling using LP

Alternative to CPM, we can use LP to find a schedule that
achieves the minimum project completion time
Compared to CPM
- No ES, EF, LS, LF
- Only one feasible schedule
- Flexibility in modeling more complicated issues (Project
crashing)

Week 9
Project Management
Activity Predecessors Duration
3-month study - 3
6-month study - 6
18-month study - 18
Result analysis 3-, 6-, 18- month study 3
FDA Result analysis 12
Marketing Result analysis 8
Factory building - 24
Inventory Factory building 6
Launch FDA, Inventory, Marketing -
Week 9
Project Management
3-month study FDA
18-month study Marketing
Factory build Inventory
We want to achieve the minimum project completion time.

Formulate it as a linear programming model.
– decision variables?
– objective function?
– constraints? 57
Project Management
Project Scheduling using LP

Decision variables: start time of each activity
Objective: minimize project duration
Constraints: predecessor/successor pairs

Week 9
Project Management
Decision Variables
• Decision Variables: : start time of activity

• Parameters: : duration of Activity

Week 9
Project Management
Objective Function
Objective:

Week 9
Project Management
Constraints
,
,
,
,
,
,
,
0 for any
Week 9
Project Management
• Decision Variables : start time of Activity ,
• Parameters : duration of Activity ,
Subject to
,
,,,
,,,
0 for any

Week 9
Project Management
Project Management
Sensitivity Table: Critical Path
• Activities with a shadow price of 1 are on the critical path. shadow price = 1
means that the overall project duration increases by 1 if the activity duration
increases by 1.

Week 9
Project Management
Total Slack for Non-Critical

Activities
• Total slack of first activity (3-month study) is 15 because the allowable

increase of the first constraint is 15. Up to 15 units of increase same
shadow price of 0 is relevant (that is, project completion time does not
change), after 15 a new shadow price will be relevant (which is 1).
Week 9
Project Management
Sensitivity Table
• If we increase by 4, what is the impact on project completion time?

, Excel limitations:
,,, Increase the number on RHS of
this constraint only
,,,
No links if one parameter is used
in multiple places

OPIM101 9 Updated

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SMU Classification: Restricted

Decision Analysis – OPIM 101 1

Decision Analysis – OPIM 101 2

Decision Analysis – OPIM 101 3

- The expected number of new jobs globally in project

- 90% of global senior executives rank project management

Decision Analysis – OPIM 101 4

Some Famous Examples

Of course, as an architectural masterpiece and an

Some Famous Examples

Since Antoni Gaudí (1852–1926), there

Current chief architect Jordi Fauli said it is on track to complete in 2026 to

Decision Analysis – OPIM 101 6

Project Management: Practice

Decision Analysis – OPIM 101 8

Decision Analysis – OPIM 101 9

Decision Analysis – OPIM 101 10

Decision Analysis – OPIM 101 11

Vaccine and Drug Development

Decision Analysis – OPIM 101 12

Bill Gates is able

Through the Bill and Melinda Gates Foundation, the billionaire Microsoft

Decision Analysis – OPIM 101 13

Decision Analysis – OPIM 101 14

Project Activity Network

Insert “Start” node as first project activity

Decision Analysis – OPIM 101 15

Decision Analysis – OPIM 101 16

3-month study FDA

Start 6-month study Result Analysis Launch

18-month study Marketing

Factory build Inventory

Insert “Start” node as first project activity

Critical Path Method: CPM

Decision Analysis – OPIM 101 18

Critical Path Method: Steps

- ES: earliest time at which an activity can be started: As

- EF: ES plus the time required to perform the activity

Decision Analysis – OPIM 101 19

Critical Path Method: Steps

Decision Analysis – OPIM 101 20

Information at Each Activity Node

ESi = earliest LSi = latest possible

Decision Analysis – OPIM 101 21

Information at Each Activity Node

EFi = earliest LSi LFi LFi = latest possible

Decision Analysis – OPIM 101 22

0 0 18-month study Marketing

0 18 Factory build Inventory

Decision Analysis – OPIM 101 23

Critical Path Method: Steps

Decision Analysis – OPIM 101 24

0 0 18-month study Marketing

0 18 Factory build Inventory

Decision Analysis – OPIM 101 25

Decision Analysis – OPIM 101 27

Critical Path Method: Steps

Decision Analysis – OPIM 101 28

Decision Analysis – OPIM 101 29

Decision Analysis – OPIM 101 30

Decision Analysis – OPIM 101 31

Decision Analysis – OPIM 101 32

Decision Analysis – OPIM 101 33