BA 7201 Operations Management I MBA / II Semester

Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,

Hindusthan Institute of Technology, Coimbatore 641 032.
UNIT – V PROJECT AND FACILITY PLANNING
Project Management – Scheduling Techniques, PERT, CPM, Crashing CPM networks – Simple Problems.
Facility Location – Theories, Steps in Selection, Location Models – Simple Problems. Facility Layout –
Principles, Types, Planning tools and techniques.

Project Management:
A project is an organized endeavour to accomplish a specified non-routine or low volume task. Although
projects are not repetitive, they take significant amount of time to complete and are large scale or complex
enough to be recognized and managed as separate undertakings.
Project life cycle:
1. The concept phase: During this phase, the organization realises that a project may be needed or the
organization is requested to propose a plan to perform a project for some customer.
2. Initial planning or feasibility phase: During the phase, the project manager plans the project to a level of
detail, sufficient for initial scheduling and budgeting.
3. Detailed planning phase: If the project is approved, then detailed scheduling and budgeting is done in this
phase.
4. Organisation phase: During this phase, a detailed project definition such as the work breakdown structure is
examined.
5. Execution phase: During this phase the various activities planned and completed as per the schedule, utilizing
the allotted resources.
6. Termination phase: This is the phase, during which the project is terminated or disbanded after completion.
The personnel who were working in the project are assigned back to their regular jobs or to other jobs in the
organisation or to other projects in this phase
Role of a Project Manager:
1. Manage the project‘s scope to define the goals and work to be done, in sufficient detail to facilitate
understanding and correct performance by the participants
2. Manage the human resources involved in the project
3. Manage communications to see that, the appropriate parties are informed
4. Manage time by planning and meeting a schedule
5. Manage quality so that, the projects results are satisfactory
6. Manage costs so that, the project is performed at the minimum practical cost and with in budget if possible.
Terms Used in Project Management
Activity : A certain amount of work or task required in the project
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.
Activity duration: In CPM the best estimate of time to complete an activity . In PERT the expected time or
average time to complete an activity
Critical activity : An activity that has no room for schedule slippages : if it slips the entire the entire project
completion will slip. An activity with zero slack
Activity : A certain amount of work or task required in the project
Activity duration: In CPM the best estimate of time to complete an activity . In PERT the expected time or
average time to complete an activity
Critical activity : An activity that has no room for schedule slippages : if it slips the entire the entire project
completion will slip. An activity with zero slack
Event :A beginning , a completion point ,or a milestone accomplishment within the project. An activity
begins and ends with events
Latest finish (LF) : The latest that an activity can finish from the beginning of the project
Latest start (LS) :The latest that an activity can start from the beginning of the project
Most likely time ( t m) : The time for completing the activity that is is the consensus best estimate, used in
PERT
Optimistic Time (to): The time for completing an activity if all goes well : used in PERT
Pessimistic Time (tp): The time for completing an activity if bad luck is encountered : used in PERT
Predecessor activity : An activity that must occur before another activity .
Slack : The amount of time that an activity or group of activities can slip without causing a delay in the
completion of the project
Successor activity : An activity that must occur after another activity
Conventions used in drawing network diagrams (Arrows & Circles )
Activity on Arrow (AOA) : The activities are denoted by Arrows and events are denoted by circles
Activity on Node(AON) : Activities are denoted by circles(or nodes) and the precedence relation ships
between activities are indicated by arrows
Scheduling:
Scheduling is the process of deciding how to commit resources between a variety of possible tasks. Time can be
specified (scheduling a flight to leave at 8:00) or floating as part of a sequence of events.
Scheduling Techniques
Gantt Chart:
During the era of scientific management, Henry Gantt developed a tool for displaying the progression of a
project in the form of a specialized chart. An early application was the tracking of the progress of ship building
projects. Today, Gantt's scheduling tool takes the form of a horizontal bar graph and is known as a Gantt chart,
a basic sample of which is shown below:
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.

The horizontal axis of the Gantt chart is a time scale, expressed either in absolute time or in relative time
referenced to the beginning of the project. The time resolution depends on the project - the time unit typically is
in weeks or months. Rows of bars in the chart show the beginning and ending dates of the individual tasks in the
project.
In the above example, each task is shown to begin when the task above it completes. However, the bars may
overlap in cases where a task can begin before the completion of another, and there may be several tasks
performed in parallel. For such cases, the Gantt chart is quite useful for communicating the timing of the
various tasks.
For larger projects, the tasks can be broken into subtasks having their own Gantt charts to maintain readability.
Gantt Chart Enhancements
This basic version of the Gantt chart often is enhanced to communicate more information.
A vertical marker can used to mark the present point in time.
The progression of each activity may be shown by shading the bar as progress is made, allowing the status of
each activity to be known with just a glance.
Dependencies can be depicted using link lines or color codes.
Resource allocation can be specified for each task.
Milestones can be shown.
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.
PERT:
Complex projects require a series of activities, some of which must be performed sequentially and others that
can be performed in parallel with other activities. This collection of series and parallel tasks can be modeled as
a network. In 1957 the Critical Path Method (CPM) was developed as a network model for project management.
CPM is a deterministic method that uses a fixed time estimate for each activity.
While CPM is easy to understand and use, it does not consider the time variations that can have a great impact
on the completion time of a complex project.
The Program Evaluation and Review Technique (PERT) is a network model that allows for randomness in
activity completion times. PERT was developed in the late 1950's for the U.S.
Navy's Polaris project having thousands of contractors. It has the potential to reduce both the time and cost
required to complete a project.
The Network Diagram
In a project, an activity is a task that must be performed and an event is a milestone marking the completion of
one or more activities. Before an activity can begin, all of its predecessor activities must be completed. Project
network models represent activities and milestones by arcs and nodes. PERT originally was an activity on arc
network, in which the activities are represented on the lines and milestones on the nodes. Over time, some
people began to use PERT as an activity on node network. For this discussion, we will use the original form of
activity on arc.
The PERT chart may have multiple pages with many sub-tasks. The following is a very simple example of a
PERT diagram:
PERT Chart
The milestones generally are numbered so that the ending node of an activity has a higher number than the
beginning node. Incrementing the numbers by 10 allows for new ones to be inserted without modifying the
numbering of the entire diagram. The activities in the above diagram are labeled with letters along with the
expected time required to complete the activity.
Steps in the PERT Planning Process
PERT planning involves the following steps:
Identify the specific activities and milestones.
Determine the proper sequence of the activities.
Construct a network diagram.
Estimate the time required for each activity.
Determine the critical path.
Update the PERT chart as the project progresses.
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.
1. Identify Activities and Milestones
The activities are the tasks required to complete the project. The milestones are the events marking the
beginning and end of one or more activities. It is helpful to list the tasks in a table that in later steps can be
expanded to include information on sequence and duration.
2. Determine Activity Sequence
This step may be combined with the activity identification step since the activity sequence is evident for some
tasks. Other tasks may require more analysis to determine the exact order in which they must be performed.
3. Construct the Network Diagram
Using the activity sequence information, a network diagram can be drawn showing the sequence of the serial
and parallel activities. For the original activity-on-arc model, the activities are depicted by arrowed lines and
milestones are depicted by circles or "bubbles".
If done manually, several drafts may be required to correctly portray the relationships among activities.
Software packages simplify this step by automatically converting tabular activity information into a network
diagram.
4. Estimate Activity Times
Weeks are a commonly used unit of time for activity completion, but any consistent unit of time can be used.
A distinguishing feature of PERT is its ability to deal with uncertainty in activity completion times. For each
activity, the model usually includes three time estimates:
Optimistic time - generally the shortest time in which the activity can be completed. It is common practice to
specify optimistic times to be three standard deviations from the mean so that there is approximately a 1%
chance that the activity will be completed within the optimistic time.
Most likely time - the completion time having the highest probability. Note that this time is different from the
expected time.
Pessimistic time - the longest time that an activity might require. Three standard deviations from the mean is
commonly used for the pessimistic time.
PERT assumes a beta probability distribution for the time estimates. For a beta distribution, the expected time
for each activity can be approximated using the following weighted average:
Expected time = ( Optimistic + 4 x Most likely + Pessimistic ) / 6
This expected time may be displayed on the network diagram.
To calculate the variance for each activity completion time, if three standard deviation times were selected for
the optimistic and pessimistic times, then there are six standard deviations between them, so the variance is
given by:
[ ( Pessimistic - Optimistic ) / 6 ]2
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.
5. Determine the Critical Path
The critical path is determined by adding the times for the activities in each sequence and determining the
longest path in the project. The critical path determines the total calendar time required for the project. If
activities outside the critical path speed up or slow down (within limits), the total project time does not change.
The amount of time that a non-critical path activity can be delayed without delaying the project is referred to as
slack time.
If the critical path is not immediately obvious, it may be helpful to determine the following four quantities for
each activity:
ES - Earliest Start time
EF - Earliest Finish time
LS - Latest Start time
LF - Latest Finish time
These times are calculated using the expected time for the relevant activities. The earliest start and finish times
of each activity are determined by working forward through the network and determining the earliest time at
which an activity can start and finish considering its predecessor activities. The latest start and finish times are
the latest times that an activity can start and finish without delaying the project. LS and LF are found by
working backward through the network.
The difference in the latest and earliest finish of each activity is that activity's slack. The critical path then is the
path through the network in which none of the activities have slack.
The variance in the project completion time can be calculated by summing the variances in the completion
times of the activities in the critical path. Given this variance, one can calculate the probability that the project
will be completed by a certain date assuming a normal probability distribution for the critical path. The normal
distribution assumption holds if the number of activities in the path is large enough for the central limit theorem
to be applied.
Since the critical path determines the completion date of the project, the project can be accelerated by adding
the resources required to decrease the time for the activities in the critical path. Such a shortening of the project
sometimes is referred to as project crashing.
6. Update as Project Progresses
Make adjustments in the PERT chart as the project progresses. As the project unfolds, the estimated times can
be replaced with actual times. In cases where there are delays, additional resources may be needed to stay on
schedule and the PERT chart may be modified to reflect the new situation.
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.
Benefits of PERT
PERT is useful because it provides the following information:
Expected project completion time.
Probability of completion before a specified date.
The critical path activities that directly impact the completion time.
The activities that have slack time and that can lend resources to critical path activities.
Activity start and end dates.
Limitations
The following are some of PERT's weaknesses:
The activity time estimates are somewhat subjective and depend on judgement. In cases where there is little
experience in performing an activity, the numbers may be only a guess. In other cases, if the person or group
performing the activity estimates the time there may be bias in the estimate.
Even if the activity times are well-estimated, PERT assumes a beta distribution for these time estimates, but the
actual distribution may be different.
Even if the beta distribution assumption holds, PERT assumes that the probability distribution of the project
completion time is the same as the that of the critical path. Because other paths can become the critical path if
their associated activities are delayed, PERT consistently underestimates the expected project completion time.
The underestimation of the project completion time due to alternate paths becoming critical is perhaps the most
serious of these issues. To overcome this limitation, Monte Carlo simulations can be performed on the network
to eliminate this optimistic bias in the expected project completion time.

CPM:
In 1957, DuPont developed a project management method designed to address the challenge of shutting down
chemical plants for maintenance and then restarting the plants once the maintenance had been completed. Given
the complexity of the process, they developed the
Critical Path Method (CPM) for managing such projects.
CPM provides the following benefits:
Provides a graphical view of the project.
Predicts the time required to complete the project.
Shows which activities are critical to maintaining the schedule and which are not.
CPM models the activities and events of a project as a network. Activities are depicted as nodes on the network
and events that signify the beginning or ending of activities are depicted as arcs or lines between the nodes. The
following is an example of a CPM network diagram:
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.
CPM Diagram

Steps in CPM Project Planning

1. Specify the individual activities.
2. Determine the sequence of those activities.
3. Draw a network diagram.
4. Estimate the completion time for each activity.
5. Identify the critical path (longest path through the network)
6. Update the CPM diagram as the project progresses.
1. Specify the Individual Activities
From the work breakdown structure, a listing can be made of all the activities in the project. This listing can be
used as the basis for adding sequence and duration information in later steps.
2. Determine the Sequence of the Activities
Some activities are dependent on the completion of others. A listing of the immediate predecessors of each
activity is useful for constructing the CPM network diagram.
3. Draw the Network Diagram
Once the activities and their sequencing have been defined, the CPM diagram can be drawn. CPM originally
was developed as an activity on node (AON) network, but some project planners prefer to specify the activities
on the arcs.
4. Estimate Activity Completion Time
The time required to complete each activity can be estimated using past experience or the estimates of
knowledgeable persons. CPM is a deterministic model that does not take into account variation in the
completion time, so only one number is used for an activity's time estimate.
5. Identify the Critical Path
The critical path is the longest-duration path through the network. The significance of the critical path is that the
activities that lie on it cannot be delayed without delaying the project. Because of its impact on the entire
project, critical path analysis is an important aspect of project planning.
The critical path can be identified by determining the following four parameters for each activity:
 BA 7201 Operations Management I MBA / II Semester
Mr. J. Christopher Xavier, Associate Professor, Department of Management Sciences,
Hindusthan Institute of Technology, Coimbatore 641 032.
ES - earliest start time: the earliest time at which the activity can start given that its precedent activities must
be completed first.
EF - earliest finish time, equal to the earliest start time for the activity plus the time required to complete the
activity.
LF - latest finish time: the latest time at which the activity can be completed without delaying the project.
LS - latest start time, equal to the latest finish time minus the time required to complete the activity.
The slack time for an activity is the time between its earliest and latest start time, or between its earliest and
latest finish time. Slack is the amount of time that an activity can be delayed past its earliest start or earliest
finish without delaying the project.
The critical path is the path through the project network in which none of the activities have slack, that is, the
path for which ES=LS and EF=LF for all activities in the path. 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.
6. Update CPM Diagram
As the project progresses, the actual task completion times will be known and the network diagram can be
updated to include this information. A new critical path may emerge, and structural changes may be made in the
network if project requirements change.