MBA@IICMR – Pune 44

MBA SEM II

Paper No. 204

Subject: Decision Science

Subject Teacher: Prof. Vidhya Hittalmani

Notes Unit 4

CPM and PERT

PERT and CPM have been used for a variety of projects, including the following
types.

1. Construction of a new plant

2. Research and development of a new product
3. NASA space exploration projects
4. Movie productions
5. Building a ship
6. Government-sponsored projects for developing a new weapons system
7. Relocation of a major facility
8. Maintenance of a nuclear reactor
9. Installation of a management information system
10. Conducting an advertising campaign

PERT – Program Evaluation & Review Technique – It is generally used for those projects where
time required to complete various activities are not known as a priori. It is probabilistic model &
is primarily concerned for evaluation of time. It is event oriented.

The PERT Three-Estimate Approach

The three estimates to be obtained for each activity are

Most likely estimate (m) estimate of the most likely value of the duration,
Optimistic estimate (o) estimate of the duration under the most favorable conditions,
Pessimistic estimate (p) estimate of the duration under the most unfavorable
conditions.

CPM – Critical Path Analysis – It is a commonly used for those projects which are repetitive in
nature & where one has prior experience of handling similar projects. It is a deterministic model
& places emphasis on time & cost for activities of a project
A Critical Path Method is a project management tool used to formulate a time frame for a project
in order to determine where potential delays are most likely to occur. The process includes a
step-by-step process that provides the developer with a visual representation of potential
bottlenecks throughout the course of the project.

Project Networks
A network used to represent a project is called a project network. A project network consists of a
number of nodes (typically shown as small circles or rectangles) and a number of arcs (shown as
arrows) that lead from some node to another.

Steps for drawing CPM/PERT network:

1. Analyze & break up of the entire project into smaller systems i.e. specific activities and/or
events.
2. Determine the interdependence & sequence of those activities.
3. Draw a network diagram.
4. Estimate the completion time, cost, etc. for each activity.
5. Identify the critical path (longest path through the network).
6. Update the CPM/PERT diagram as the project progresses.

Network Representation:

Each activity of the project is represented by arrow pointing in direction of progress of project.
The events of the network establish the precedence relationship among different activities.

Three rules are available for constructing the network.

Rule 1. Each activity is represented by one & only one, arrow.

Rule 2. Each activity must be identified by two distinct events & No two or more activities can
have the same tail and head events.

Rule 3. To maintain correct precedence relationship, the following questions must be answered
as each activity is added to the network:
(a) What activities must be immediately precede the current activity?
(b) What activities must follow the current activity?
(c) What activities must occur concurrently with the current activity?

Project Networks
A network used to represent a project is called a project network. A project network
consists of a number of nodes (typically shown as small circles or rectangles) and a
number of arcs (shown as arrows) that lead from some node to another

Distinction between PERT and CPM

 PERT CPM
1 PERT is used for non-repetitive jobs like CPM is used for repetitive job like
planning the assembly of the space. building a house
2 it is a probabilistic model. It is a deterministic model.
3 It is event-oriented as the results of analysis are It is activity-oriented as the result or
expressed in terms of events or distinct points calculations are
in time indicative of progress. considered in terms of activities or
operations of the
project.
4 It is applied mainly for planning and It is applied mainly for construction and
scheduling research programmes. business problems.

5 PERT incorporates statistical analysis and CPM does not incorporate statistical
thereby determines the probabilities concerning analysis in determining time estimates,
the time by which each activity or entire because time is precise and known.
project would be completed
6 PERT serves as useful control device as it It is difficult to use CPM as a control
assists management in controlling a project by device for the simple reason that one must
calling attention to such delays repeat the entire evaluation of the project
each time the changes are introduced into
the network

Numbering the Events (Fulkerson’s Rule)

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 as 2, 3, 4, ….
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 or terminal node, which has all arrows coming in with no arrow going
out is numbered.

Determination of time to complete each activity:

The CPM system of networks omits the probabilistic consideration and is based on a Single
Time Estimate of the average time required to execute the activity.

In PERT analysis, there is always a great deal of uncertainty associated with the activity
durations of any project.
Therefore, the estimated time is better described by a probability distribution than by a single
estimate. Three time estimates (from beta probability distribution) are made as follows:

1) The Optimistic Time Estimate (to): Shortest possible time in which an activity can be
completed in ideal conditions. No provisions are made for delays or setbacks while estimating
this time.
2) The Most Likely Time (tm): It assumes that things go in normal way with few setbacks.
3) The Pessimistic Time (tp): The max. possible time if everything go wrong & abnormal
situations prevailed. However, major catastrophes such as earthquakes, labour troubles, etc. are
not taken into account.
The expected time (mean time) for each activity can be approximated using the weighted average
i.e.
Expected Time (te) = (to + 4tm + tp)/6

Forward Pass Computation: It is the process of tracing the network from START to END. It
gives the earliest start & finish times for each activity.

Earliest event time (Ej): The time that event j will occur if the preceding activities are started as
early as possible.
Ej is the max. of the sums Ei + tij involving each immediately precedent event i & intervening
event ij.
Backward Pass Computation: It is the process of tracing the network starting from LAST node &
moving backward.
Latest event time (Lj): The latest time that event i can occur without delaying completion of
beyond its earliest time.
Li is the min. of the differences Li - tij involving each immediately precedent event j &
intervening event ij.

The critical path can be identified by determining the following four parameters for each
activity:
• EST - earliest start time: the earliest time at which the activity can start given that all its
precedent activities must be completed first = Ei
• EFT - earliest finish time, equal to the earliest start time for the activity plus the time required
to complete the activity = EST(i-j) + tij
• LFT - latest finish time: the latest time at which the activity can be completed without delaying
(beyond its targeted completion time) the project = Lj
• LST - latest start time, equal to the latest finish time minus the time required to complete the
activity = LFT(i-j) - tij

CRITICAL PATH: The critical path is the path through the project network in which none of
the activities have float (total float is zero) i.e. A critical path satisfies following 3 conditions:
• EST =LST
• EFT=LFT
• Ej – Ei = Lj – Li = tij

The duration of project is fixed by the time taken to complete the path through the network with
the greatest total duration. This path is known as critical path & activities on it are known as
critical activities. A delay in the critical path delays the project. Similarly, to accelerate the
project it is necessary to reduce the total time required for the activities in the critical path.

The duration of project is fixed by the time taken to complete the path through the network with
the greatest total duration. This path is known as critical path & activities on it are known as
critical activities. A delay in the critical path delays the project. Similarly, to accelerate the
project it is necessary to reduce the total time required for the activities in the critical path.

The free float time of an activity is equal to the amount by which its duration can be increased
without affecting either the project time or the time available for the subsequent activities. It
indicates the value by which an activity can be delayed beyond the earliest starting point without
affecting the earliest start, & therefore, the total float of the activities following it. = Total Floatij
– (Slack of event j)

The independent float time of an activity is the amount by which the duration of an activity
could be extended without affecting the total project time, the time available for subsequent
activities or the time available for the preceding activities. = [Free Floatij – (Slack of event i)] or
ZERO, whichever is higher. Also EST of following activity – LFT of preceding activity –
Duration of current activity or Zero, whichever is higher

Advantages of Using a CPM

 Helpful for scheduling, monitoring, and controlling projects

 A project manager can determine actual dates for each activity and compare what should
be happening to what is taking place and react accordingly
 The activities and their outcomes can be shown as a network
 Displays dependencies to help scheduling
 Evaluates which activities can run parallel to each other
 Determines slack and float times
 Widely used in industry
 Can define multiple, equally critical paths
 CMP determines the project duration, which minimized the sum of direct and indirect
costs

Disadvantages of Using a CPM

 CPM's can be complicated, and complexity increases for larger projects

 Does not handle the scheduling of personnel or the allocation of resources
 The critical path is not always clear and needs to be calculated carefully
 Estimating activity completion times can be difficult

Sequencing problem

Sequencing problem is a technique which a business organisation used to find out that sequence
of completing the job which reduces the total time and the ideal time of the machine.

Sequencing problem is the selection of an appropriate order in which a number of jobs

(Operations) can be assigned to to a finite number of service facilities (Machines or equipments)
so as to optimize the outputs in terms of time, cost or profit
Common Sequencing Rules

 FCFS: First Come First Served. Jobs processed in the order they come to the shop.
 SPT: Shortest Processing Time. Jobs with the shortest processing time are scheduled first.
 EDD: Earliest Due Date. Jobs are sequenced according to their due dates.
 CR: Critical Ratio. Compute the ratio of processing time of the job and remaining time
until the due date. Schedule the job with the largest CR value next.

Two Work Center Sequencing

Johnson’s Rule:

 Technique for minimizing completion time for a group of jobs to be processed on two
machines or at two work centers.
 Minimizes total idle time
 Several conditions must be satisfied

Johnson’s Rule Conditions

 Job time must be known and constant

 Job times must be independent of sequence
 Jobs must follow same two-step sequence
 Job priorities cannot be used
 All units must be completed at the first work center before moving to the second

Sequencing Problems

 One machine, many jobs

 Two machines, many jobs
 Three machines, many jobs
 Many machines, many jobs