Network Analysis and Critical Path

Methods, Risk Analysis & Mgt.

BSS052-6
THEME-6 (6.1 Lecture)

Introduction & Overview

 Learning Outcomes

Students should be able to demonstrate an in-

depth knowledge and critical appreciation of
Operations and Project Management tools and
techniques for various planning and decisions
within organisations.
 Aim of the unit:

Evaluate the principles and techniques

associated with Project and Operations
Management both in manufacturing and
service industries in the private and public
sectors.
 Network techniques: PERT & CPM

 The Program Evaluation and Review

Technique (PERT) is a widely used method for
planning and coordinating large-scale
projects.

 PERT is basically a management planning and

control tool.

 The technique is often referred to as

PERT/CPM, the CPM standing for "critical path
method."
 PERT & CPM

PERT
 Developed by U.S. Navy for Polaris missile
project
 Developed to handle uncertain activity times
CPM
 Developed for industrial projects for which
activity times generally were known

Today’s project management software packages

have combined the best features of both approaches.
 DEFINITION OF TERMS IN A NETWORK

 Activity any portions of project (tasks) which required

by project, uses up resource and consumes
time – may involve labor, paper work,
contractual negotiations, machinery operations
Activity on Arrow (AOA) showed as arrow, AON
– Activity on Node

 Event : beginning or ending points of one or more

activities, instantaneous point in time, also
called ‘nodes’

 Network : Combination of all project activities and the events

 Project Network
 A project network can be constructed to model the
precedence of the activities.
 The arcs of the network represent the activities.
 The nodes of the network represent the start and the
end of the activities.
 A critical path for the network is a path consisting of
activities with zero slack. And it is always the longest
path in the project network.
 uu

Example: John’s Fine Floats

 John’s Fine Floats is in the business of building
elaborate parade floats. Frank and his crew have a new
float to build and want to use PERT/CPM to help them
manage the project
 The table below shows the activities that comprise the
project. Each activity’s estimated completion time (in
days) and immediate predecessors are listed as well.
 John wants to know the total time to complete the
project, which activities are critical, and the earliest and
latest start and finish dates for each activity.
Example: John’s Fine Floats
 Earliest Start and Finish Times
Step1: Make a forward pass through the network as follow: For
each activity 1 beginning at the start node, compute:
SteSteeeeeeeeeeeeeeeeeeeeeeeeep1: Make a
Earliest Start Time = the maximum
Potential
forward pass through
of the earliest finish times of
the network as follow:
all activities immediately
For each
Step1: Make preceding
activity 1
a beginningactivity
at the
forward pass i. (This
start
through the is 0 for an
node, network
compute:p1: Make a forwardFor
as follgggggggow: pass
each
activity with no predecessors.)
through the network
activity as follow:
1 beginning at theFor each
start node,
activity 1 beginning at the start node,
compute:
Earliest Finish Time = (Earliestcompute: Start Time) + (Time to complete
activity i ).
The project completion time is the maximum of the Earliest
Finish Times at the Finish node.
 Latest Start and Finish Times
 Step 2: Make a backwards pass through the
network as follows: Move sequentially backwards
from the Finish node to the Start node. At a given
node, j, consider all activities ending at node j. For
each of these activities, i, compute:
 Latest Finish Time = the minimum of the latest start
times beginning at node j. (For node N, this is the
project completion time.)
 Latest Start Time = (Latest Finish Time) - (Time to
complete activity i ).
John’s Fine Floats
 Organizational and management implications of self-managing work
teams

https://www.youtube.com/wat
ch?v=iPZlQ3Zx5zc
 Using Tools uuuqff
&/ techniques
for scheduling

 The project schedule is the tool that

communicates what work needs to be
performed, which resources of the
organization will perform the work and the
timeframes in which that work needs to be
performed.
• Goal is to establish a pragmatic strategy for
controlling, tracking, and monitoring a complex
technical project.
• Program Evaluation and Review Technique
(PERT) and Critical Path Method (CPM) is a
project scheduling method that determines:
• Critical Path, Earliest start and Latest Time for
task initiation that will not delay the project.
• Total Float (the maximum slippage without
overall delay)
 Using Tools &/ techniques for
scheduling

Others Tools &/ techniques for scheduling involves

 WBS – Work break down structure

 Gantt chart

 Microsoft Project

 Primavera P6

 Critical Path Method

 Schedule Network Analysis

Scheduling tools
Work Breakdown Structure
 Critical Path Method
PERT is based on a Beta Probability
Distribution

• A normal distribution is a special case of a beta distribution

• The expected time, t, of any given activity is given by the formula:

t = (o+4m+p)/6
Example 1: converting the Activity List to an
AoN Diagram
Converting the Activity List to
an AoN Diagram
Diagram
 Using PERT

•Let us reconsider Example 1, and this time let us also include

estimates for most optimistic time, o, and pessimistic time, p, as
given in the activity list above.
•We can now use the PERT formula to calculate the expected
time, t, for each of the activities
 Calculating activity
duration expected times.

•The table shows that Activity B has a higher variance than Activity A.
•This tells us that we can have more confidence in our estimate for the
time to complete Activity A rather than our estimate for Activity B
 Crashing a project
Concurrency and Fast Tracking
 Crashing a project

• The project may be behind schedule, or,

• The scheduled project completion time needs
to be moved forward
• Therefore some of the project activities need to
be speeded up – project crashing!
• Crash time = shortest duration required to
complete the activity…costs will be different
(higher) compared to normal time.
 Calculating Crash Costs per unit
time
Activity Cost

Crash Cost….. £34,000

£33,000

£32,000

£31,000
=£2,000 per week
Normal Cost.. £30,000

1 2 3 Time (Weeks)

Crash Normal
Time Time
Project “Crash” Data
 Network Diagram on which table
on previous slide is based.

0 2 2 4 4 7
0 A 2 0 C 2 6 F 3
0 2 2 4 10 13

4 8 13 15
0 0 0 E 4 0 H 2
S 0 4 8 13 15
0 0

0 3 3 7 8 13
1 B 3 1 D 4 0 G 5
1 4 4 8 8 13

Critical Path: A,C,E,G,H

 0 1 1 3 3 6
0 A 1 0 C 2 6 F 3
0 1 1 3 9 12
Activity A crashed
from 2 weeks to
1 week
3 7 12 14
0 0 0 E 4 0 H 2
S 0 3 7 12 14
0 0

0 3 3 7 7 12
0 B 3 0 D 4 0 G 5
0 3 3 7 7 12

Critical Path 1: A,C,E,G,H

New Criticla Path: B,D,G,H
 Resource Allocation

• Resource allocation permits efficient use of

physical assets
– Within a project, or across multiple projects
– Drives both the identification of resources, and
timing of their application
• There are generally two conditions:
– “Normal”
– “Crashed”
 The Resource
Allocation Problem

• Most scheduling procedures do not address the

issues of resource utilization and availability
• Scheduling procedures tend to focus on time
rather than physical resources
• Time itself is always a critical resource in
project management
– It is unique because it can neither be inventoried
nor renewed
 The Resource
Allocation Problem
• Schedules should be evaluated:
– in terms of meeting project milestones
– in terms of the timing and use of scarce
resources
• Measure of the project manager’s success:
skill with which the trade-offs among:
– Performance
– Time
– Cost
 Resource Loading

 Describes the amounts of individual

resources an existing schedule requires
during specific time periods
 The loads (requirements) of each resource
type are listed as a function of time period
 Gives a general understanding of the
demands a project or set of projects will
make on a firm’s resources
Resource Loading
 Resource Levelling
• Resource leveling aims to minimize the period-
by-period variations in resource loading by
shifting tasks within their slack allowances
• The purpose is to create a smoother distribution
of resource usage
• Several advantages include:
– Less day-to-day resource manipulation
needed
– Better morale, fewer HR problems/costs
– Leveling resources also levels costs,
simplifies budgeting and funding
 Resource Levelling

• When resources are leveled, the associated costs

also tend to be leveled
• The project manager must be aware of the cash
flows associated with the project and of the
means of shifting them in ways that are useful to
the parent firm
• Resource leveling is a procedure that can be
used for almost all projects, whether or not
resources are constrained
Resource Levelling
 References

 APM (2006), APM Body of Knowledge (APMBOK) 5th edition,

Association for Project Management, High Wycombe, UK.

 Chapter 17 of the Operations Management 6th edition

textbook by Slack et al. (2010).

 Chapter 8 of PMI (2008), A Guide to the Project Management

Body of Knowledge (PMBOK), 4th edition, Project
Management Institute, Pennsylvania, USA.
Any Question Please ….