Anderson

Sweeney

Williams

QUANTITATIVE METHODS FOR BUSINESS 8e

Slides Prepared by JOHN LOUCKS

2001 South-Western College Publishing/Thomson Learning

Slide 1

Chapter 12 Project Scheduling: PERT/CPM

Project Scheduling with Known Activity Times Project Scheduling with Uncertain Activity Times Considering Time-Cost Trade-Offs

Slide 2

PERT/CPM

PERT stands for Program Evaluation Review Technique. CPM stands for Critical Path Method. PERT/CPM is used to plan the scheduling of individual activities that make up a project. PERT/CPM can be used to determine the earliest/latest start and finish times for each activity, the entire project completion time and the slack time for each activity.

Slide 3

Project Network

A project network can be constructed to model the precedence of the activities. The nodes of the network represent the activities. The arcs of the network reflect the precedence relationships of the activities. A critical path for the network is a path consisting of activities with zero slack.

Slide 4

Determining the Critical Path

Step 1: Make a forward pass through the network as follows: For each activity i beginning at the Start node, compute: Earliest Start Time = the maximum of the earliest finish times of all activities immediately preceding activity i. (This is 0 for an activity with no predecessors.) Earliest Finish Time = (Earliest Start Time) + (Time to complete activity i. The project completion time is the maximum of the Earliest Finish Times at the Finish node.

Slide 5

Determining the Critical Path

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,j), 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,j)).

Slide 6

Determining the Critical Path

Step 3: Calculate the slack time for each activity by: Slack = (Latest Start) - (Earliest Start), or = (Latest Finish) - (Earliest Finish). A critical path is a path of activities, from the Start node to the Finish node, with 0 slack times.

Slide 7

Uncertain Activity Times

In the three-time estimate approach, the time to complete an activity is assumed to follow a Beta distribution. An activitys mean completion time is: t = (a + 4m + b)/6 An activitys completion time variance is: 2 = ((b-a)/6)2 a = the optimistic completion time estimate b = the pessimistic completion time estimate m = the most likely completion time estimate

Slide 8

Uncertain Activity Times

In the three-time estimate approach, the critical path is determined as if the mean times for the activities were fixed times. The overall project completion time is assumed to have a normal distribution with mean equal to the sum of the means along the critical path and variance equal to the sum of the variances along the critical path.

Slide 9

Example: ABC Associates

Consider the following project: Immed. Optimistic Most Likely Pessimistic Activity Predec. Time (Hr.) Time (Hr.) Time (Hr.) A -4 6 8 B -1 4.5 5 C A 3 3 3 D A 4 5 6 E A 0.5 1 1.5 F B,C 3 4 5 G B,C 1 1.5 5 H E,F 5 6 7 I E,F 2 5 8 J D,H 2.5 2.75 4.5 K G,I 3 5 7
Slide 10

Example: ABC Associates

PERT Network Representation

D H A E I J

Start

F K

Finish

Slide 11

Example: ABC Associates

Activity Expected Time and Variances t = (a + 4m + b)/6 2 = ((b-a)/6)2 Activity Expected Time Variance A 6 4/9 B 4 4/9 C 3 0 D 5 1/9 E 1 1/36 F 4 1/9 G 2 4/9 H 6 1/9 I 5 1 J 3 1/9 K 5 4/9
Slide 12

Example: ABC Associates

Earliest/Latest Times Activity ES EF LS LF Slack A 0 6 0 6 0 *critical B 0 4 5 9 5 C 6 9 6 9 0* D 6 11 15 20 9 E 6 7 12 13 6 F 9 13 9 13 0* G 9 11 16 18 7 H 13 19 14 20 1 I 13 18 13 18 0* J 19 22 20 23 1 K 18 23 18 23 0* Estimated Project Completion Time: Max EF = 23
Slide 13

Example: ABC Associates

Critical Path (A-C-F-I-K)

D

6 11 5 15 20

H A

0 6 6 0 6

6 7 1 12 13
E

13 19 6 14 20 13 18 5 13 18
I

19 22 3 20 23
J

Start

6 9 3 6 9
C B

9 13 4 9 13
G

Finish K

0 4 4 5 9

9 11 2 16 18

18 23 5 18 23

Slide 14

Example: ABC Associates

Probability the project will be completed within 24 hrs 2 = 2A + 2C + 2F + 2 H + 2K = 4/9 + 0 + 1/9 + 1 + 4/9 =2
= 1.414 z = (24 - 23)/(24-23)/1.414 = .71 From the Standard Normal Distribution table: P(z < .71) = .5 + .2612 = .7612

Slide 15

PERT/Cost

PERT/Cost is a technique for monitoring costs during a project. Work packages (groups of related activities) with estimated budgets and completion times are evaluated. A cost status report may be calculated by determining the cost overrun or underrun for each work package. Cost overrun or underrun is calculated by subtracting the budgeted cost from the actual cost of the work package. For work in progress, overrun or underrun may be determined by subtracting the prorated budget cost from the actual cost to date.
Slide 16

PERT/Cost

The overall project cost overrun or underrun at a particular time during a project is determined by summing the individual cost overruns and underruns to date of the work packages.

Slide 17

Example: How Are We Doing?

Consider the following PERT network:

G A 9 F Start B 8 D 3 J E 4 8 4 H 5 Finish 3 I 4

C 10

Slide 18

Example: How Are We Doing?

Earliest/Latest Times Activity ES A 0 B 0 C 0 D 8 E 8 F 9 G 9 H 12 I 12 J 17

EF LS LF Slack 9 0 9 0 8 5 13 5 10 7 17 7 11 22 25 14 12 13 17 5 13 13 17 4 12 9 12 0 17 12 17 0 16 21 25 9 25 17 25 0

Slide 19

Example: How Are We Doing?

Activity Status (end of eleventh week) Activity Actual Cost % Complete A $6,200 100 B 5,700 100 C 5,600 90 D 0 0 E 1,000 25 F 5,000 75 G 2,000 50 H 0 0 I 0 0 J 0 0

Slide 20

Example: How Are We Doing?

Cost Status Report (Assuming a budgeted cost of $6000 for each activity) Activity Actual Cost Value Difference A $6,200 (1.00)x6000 = 6000 $200 B 5,700 (1.00)x6000 = 6000 - 300 C 5,600 (.90)x6000 = 5400 200 D 0 0 0 E 1,000 (.25)x6000 = 1500 - 500 F 5,000 (.75)x6000 = 4500 500 G 2,000 (.50)x6000 = 3000 -1000 H 0 0 0 I 0 0 0 J 0 0 0 Totals $25,500 $26,400 $- 900
Slide 21

Example: How Are We Doing?

PERT Diagram at End of Week 11 The activity completion times are the times remaining for each activity.
G A 0 B 0 11 11 11 11 D 3 E 3 11 14 J 11 14 8 17.5 25.5 11 I 4 H 5 12.5 16.5 12.5 17.5 Finish 1.5 12.5 F Start
1

11 12

C 1

11 12

Slide 22

Example: How Are We Doing?

Corrective Action Note that the project is currently experiencing a $900 cost underrun, but the overall completion time is now 25.5 weeks or a .5 week delay. Management should consider using some of the $900 cost savings and apply it to activity G to assist in a more rapid completion of this activity (and hence the entire project).

Slide 23

Critical Path Method

In the Critical Path Method (CPM) approach to project scheduling, it is assumed that the normal time to complete an activity, tj , which can be met at a normal cost, cj , can be crashed to a reduced time, tj, under maximum crashing for an increased cost, cj. Using CPM, activity j's maximum time reduction, Mj , may be calculated by: Mj = tj - tj'. It is assumed that its cost per unit reduction, Kj , is linear and can be calculated by: Kj = (cj' - cj)/Mj.

Slide 24

The End of Chapter 12

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