Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

PERT - CPM

Objectives








Diagram networks of project activities
Estimate the completion time of a project
Compute the probability of completing a
project by a specific time
Determine how to reduce the length of a
project effectively
Describe the critical chain approach to
project management

Project Management
Applications


What is a project?







Any unique endeavor with specific objectives
With multiple activities
With defined precedent relationships
With a specific time period for completion

Examples?




A major event like a wedding
Any construction project
Designing a political campaign

Project Life Cycle



Conception: identify the need
Feasibility analysis or study: costs
benefits, and risks



Planning: who, how long, what to do?



Execution: doing the project



Termination: ending the project

Network Planning Techniques




Program Evaluation & Review Technique (PERT):
 Developed to manage the Polaris missile project
 Many tasks pushed the boundaries of science &
engineering (tasks’ duration = probabilistic)
Critical Path Method (CPM):
 Developed to coordinate maintenance projects in the
chemical industry
 A complex undertaking, but individual tasks are
routine (tasks’ duration = deterministic)

Both PERT and CPM







Graphically display the precedence
relationships & sequence of activities
Estimate the project’s duration
Identify critical activities that cannot be
delayed without delaying the project

Estimate the amount of slack associated with
non-critical activities
© Wiley 2010

Network Diagrams


Activity-on-Node (AON):



Uses nodes to represent the activity
Uses arrows to represent precedence relationships

Step 1-Define the Project: Cables By Us is bringing a new
product on line to be manufactured in their current facility in
existing space
...
Develop an AON for the project
...
time 
6

Calculating Expected Task Times
optimistic  4most likely   pessimisti c
Expected time 
6
Activity
A
B
C
D
E
F
G
H
I
J
K

Optimistic
time
2
3
2
4
12
2
2
2
2
2
2

Most likely
time
4
7
3
7
16
5
2
3
3
4
2

Pessimistic
time
6
10
5
9
20
8
2
4
5
6
2

Expected
time
4
6
...
17
6
...
17
4
2

Network Diagram with
Expected Activity Times

Estimated Path Durations through
the Network
Activities on paths
ABDEGHJK
ABDEGIJK
ACFGHJK
ACFGIJK


Expected duration
44
...
83
23
...
34

ABDEGIJK is the expected critical path &
the project has an expected duration of
44
...
83 Weeks

Estimating the Probability of
Completion Dates







Using probabilistic time estimates offers the advantage of
predicting the probability of project completion dates
We have already calculated the expected time for each activity by
making three time estimates
Now we need to calculate the variance for each activity
The variance of the beta probability distribution is:

po
σ 

 6 

2

2



where p=pessimistic activity time estimate

o=optimistic activity time estimate

Project Activity Variance
Activity

Optimistic

Most Likely

Pessimistic

Variance

A

2

4

6

0
...
36

C

2

3

5

0
...
69

E

12

16

20

1
...
00

G

2

2

2

0
...
11

I

2

3

5

0
...
44

K

2

2

2

0
...
82

2

A,B,D,E,G,I,J,K

4
...
24

4

A,C,F,G,I,J,K

2
...
66 weeks 
e
...
probability for path 1 is
  1
...
82

Activities on Path Path Variance z-value
(weeks)



Probability of
Completion

1

A,B,D,E,G,H,J,k

4
...
5216

0
...
96

1
...
9222

3

A,C,F,G,H,J,K

2
...
5898

1
...
38

15
...
000

Reducing Project Completion
Time


Project completion times may need to
be shortened because:








Different deadlines
Penalty clauses
Need to put resources on a new project
Promised completion dates

Reduced project completion time is
“crashing”

Reducing Project Completion
Time – con’t


Crashing a project needs to balance





Shorten a project duration
Cost to shorten the project duration

Crashing a project requires you to know



Crash time of each activity
Crash cost of each activity

Crash cost/duration = (crash cost-normal cost)/(normal time – crash time)

Reducing the Time of a Project (crashing)
Activity

Normal
Time (wk)

Normal
Cost ($)

Crash
Time

Crash
Cost ($)

Max
...





Crashing Costs are considered to be linear
Look to crash activities on the critical path
Crash the least expensive activities on the critical
path first (based on cost per week)







Crash activity I from 3 weeks to 2 weeks
Crash activity J from 4 weeks to 2 weeks
Crash activity D from 6 weeks to 4 weeks
Recommend Crash Cost

$1000
$2400
$4000
$7400

Question: Will crashing 5 weeks return more in
benefits than it costs?

Crashed Network Diagram

The Critical Chain Approach


The Critical Chain Approach focuses on project due dates rather than on
individual activities and the following realities:





Project time estimates are uncertain so we add safety time
Multi-levels of organization may add additional time to be “safe”
Individual activity buffers may be wasted on lower-priority activities
A better approach is to place the project safety buffer at the end

Original critical path
Activity A

Activity B

Activity C

Activity D

Activity E

Critical path with project buffer
Activity A Activity B

Activity C

Activity D Activity E

Project Buffer

Adding Feeder Buffers to Critical Chains





The theory of constraints, the basis for critical chains, focuses on
keeping bottlenecks busy
...

Particular concern is given to critical path (the
longest connected path through the project network)
activities
...
These techniques indicate the
expected completion time and cost of a project
...


Project Management Across
the Organization






Accounting uses project management (PM)
information to provide a time line for major
expenditures
Marketing use PM information to monitor the
progress to provide updates to the customer
Information systems develop and maintain
software that supports projects
Operations use PM to information to monitor
activity progress both on and off critical path
to manage resource requirements



---