Minimum-Cost Scheduling

(Time-Cost Trade-Off)
 Time-Cost Trade-Off
The basic assumption in minimum-cost scheduling is that there is a relationship
between activity completion time and the cost of projects.
• it costs money to expedite an activity;
• it costs money to sustain (or lengthen) the project
The costs associated with expediting activities are termed activity direct costs,
and add to the project direct cost.
The terminology relevant to expediting activities is called crashing
Crushing is a schedule compression technique used to reduce or shorten the
project schedule.
 Time-Cost Trade-Off

Some may be worker-related:

• such as overtime work,
• hiring more workers, and
• transferring worker from other jobs;
Others are resource-related:
• such as buying or leasing additional or more efficient equipment, and
• drawing on additional support facilities
 Time-Cost Trade-Off
The costs associated with sustaining the project are termed as project indirect
costs:
• overhead, facilities, and resource opportunity costs
These happen under certain contractual situations, penalty costs or lost
incentive payments.
Because activity direct costs and project indirect costs are opposing costs
dependent on time, the scheduling problem is one of finding the project
duration that minimizes their sum, or finding the optimum point in time-cost
trade-off
 Time-Cost Trade-Off Analysis: Procedure
The procedure for finding this point consists of the following five steps.
1. Prepare a CPM-type network diagram and list:
• Normal cost (NC): the lowest expected activity costs.
• Normal time (NT): the time associated with each normal cost.
• Crash time (CT): the shortest possible activity time.
• Crash cost (CC): the cost associated with each crash time.
2. Determine the cost per unit of time (assume days) to expedite each activity.
3. Compute the critical path.
4. 4. Shorten the critical path at the least cost.
5. Plot project direct, indirect, and total-cost curves and find the minimum-cost schedule.
Problem
Consider the data of a project as shown in the following table

Activity Normal Normal Cost ($) Crash Time Crash Cost ($)
Time (Weeks)
(Weeks)
1-2 7 700 4 850

1-3 5 500 3 700

If the indirect cost per week is $200,
1-4 8 600 5 1200 find the optimal crashed project
completion time
2-5 9 800 7 1520

3-5 5 700 3 1000

3-6 6 1100 5 1300

4-6 7 1200 5 450

5-7 2 400 1 500
6-7 3 500 2 850
Total 6500
 Solution
Process for crushing
1. First draw the network diagram
2. Find the critical path(s)
3. Find the slope of each activity
4. Find the total cost of the network
5. 5. Crush activities with the least slope in each critical path
6. Find the cost of the overall cost of the project after crushing
7. If overall cost is lower than previous cost, do another iteration
8. If not, an optimal solution would have been reached.
 Network Diagram
9
2 5
7 2
5

1 7
5
3
6

8 6 3

4
7
 Find the Critical Path
The critical path is the longest path through the network

1-2-5-7 = 7+9+2 =18 weeks

1-3-5-7 =5+5+2=12 weeks
1-3-6-7 = 5+6+3 =14 weeks
1-4-6-7 =8+7+3= 18 weeks

Therefore, there are two critical paths:

1-2-5-7
1-4-6-7

This implies the normal project completion time is 18 weeks

The normal project cost = total direct cost + indirect cost
=6500 + (200*18)
=6500 +3600
$10100
 Slope of Activities
Activity Normal Normal Cost ($) Crash Time Crash Slope
Time (Weeks) Cost ($) The relationship between time and cost
(Weeks) Can be assumed to be linear.
1-2 7 700 4 850 50
Slope = Crash Cost - Normal Cost
Normal Time – Crash Time
1-3 5 500 3 700 100

1-4 8 600 5 1200 200

2-5 9 800 7 1250 225

3-5 5 700 3 1000 150

3-6 6 1100 5 1300 200

4-6 7 1200 5 1450 125

5-7 2 400 1 500 100
6-7 3 500 2 850 350
Total 6500
 Crushing the Network
To crash the network, first find the crash limit and slope of the critical activities

Critical Path Critical Activities Crush Limit Slope

1-2-5-7 1-2 3 50*
2-5 2 225
5-7 1 100
1-4-6-7 1-4 3 200
4-6 2 125*
6-7 1 350

Crush Limit = Normal Time – Crush Time

Find the least slope value for the two critical paths
Crush activity 1-2 by one week
4-6 by one week
 2nd Iteration Network Diagram
9
2 5
6 2
5

1 7
5
3
6

8 6 3

4
6
 New Critical Paths
The new critical paths are: Total cost =10,100 + (50+125) -200
1-2-5-7= 6+9+2 =17weeks = $10,075
1-3-5-7=5+5+2 = 12weeks
1-3-6-7 =5+6+3 = 14weeks
Critical Path Critical Activities Critical Limit Slope
1-4-6-7 = 8+6+3 = 17weeks
1-2-5-7 1-2 2 50*
Therefore critical paths are: 2-5 2 225
1-2-5-7 = 17 weeks 5-7 1 100
1-4-6-7 = 17 weeks 1-4-6-7 1-4 3 200
4-6 1 125*
Project completion time Is 17weeks 6-7 1 350
 3rd Iteration Network Diagram
9
2 5
5 2
5

1 7
5
3
6

8 6 3

4
5
 New Critical Paths
The new critical paths are: Total cost =10,075 + (50+125) -200
1-2-5-7= 5+9+2 =16weeks = $10,050
1-3-5-7=5+5+2 = 12weeks
1-3-6-7 =5+6+3 = 14weeks
Critical Path Critical Activities Critical Limit Slope
1-4-6-7 = 8+5+3 = 16weeks
1-2-5-7 1-2 1 50*
Therefore critical paths are: 2-5 2 225
1-2-5-7 = 16 weeks 5-7 1 100
1-4-6-7 = 16 weeks 1-4-6-7 1-4 3 200*
4-6 0 125
Project completion time Is 16weeks 6-7 1 350
 4th Iteration Network Diagram
9
2 5
4 2
5

1 7
5
3
6

7 6 3

4
5
 New Critical Paths
The new critical paths are: Total cost =10,050 + (50+200) -200
1-2-5-7= 4+9+2 =15weeks = $10,100
1-3-5-7=5+5+2 = 12weeks
1-3-6-7 =5+6+3 = 14weeks Since the total cost of this 4th iteration is more that the previous iteration, we
1-4-6-7 = 7+5+3 = 15weeks have reached an optimal solution.
The final crashed project completion time is 16weeks and the corresponding critical
Therefore critical paths are: paths are 1-2-5-7 and 1-4-6-7.
1-2-5-7 = 15 weeks
1-4-6-7 = 15 weeks

Project completion time Is 15weeks