USE OF PERT AND CPM MODEL IN PROJECTS

Presented by, Sathya.S (10UTB18), Sheeba Shankari.M.C (10UTB19)

CONTENT OF THE PRESENTATION

Introduction to Network techniques (PERT and CPM Model in Projects)

Projects and its characteristics that make them amenable to be analyzed

by PERT and CPM

Development of Project Network Time estimation Determination of Critical Path Scheduling of the activities when resources are limited Crashing of the Project Network Cost controlling

INTRODUCTION TO NETWORK TECHNIQUES

Focus to Implement the project Completion of numerous activities - Resources

Purpose of network technique

Two network techniques: PERT Model - Planning and Scheduling - Risky and Uncertain Projects - Probabilistic CPM Model

- Scheduling and Cost controlling in industrial projects

- Risk free Projects - Deterministic

PROJECTS THAT ARE AMENABLE TO ANALYSIS BY PERT AND CPM

Launching a spaceship Research and Development Program

Construction of a plant
Building of a river valley project Training of a manpower Starting a new venture Characteristics of the above projects that make them amenable to analysis by PERT and CPM: - Project broke down into set of jobs - Jobs must be performed into certain sequence - Jobs can be start or stop in an independent manner

TERMINOLOGY USED IN NETWORKS

2

1 Receive Guests

3 Take Dinner 4

Activity Event Network Path Critical Forward method Backward method

RULES FOR NETWORK CONNECTION

1

Each activity should have a preceding and

a succeeding event.

Denoted

numerically

by

pair

of

preceding and succeeding event. Each event should have a unique number. No loops in the project network Not more than one activity can have the same preceding and succeeding event.

TIME ESTIMATION

Three time values are obtained for each activity, - Optimistic time (to) - Most likely time (tm) - Pessimistic time (tp) Average time:

te - weighted arithmetic average time

DETERMINATION OF CRITICAL PATH

Calculate the Earliest occurrence time (EOT) for each event - Earliest Starting time

EST(i, j) = EOT(i)
- Earliest Finishing time EFT(i, j) = EOT(i) + d(i, j)

Calculate the Latest occurrence time (LOT) for each event

- Latest Starting time LST(i, j) = LOT(j) - d(i, j)

- Latest Finishing time

LFT(i, j) = LOT(j)

CONT.

Calculate the Slack for each event Slack = LOT - EOT

Obtain the Critical and Slack paths Compute the Activity floats

Total float (i, j) = LOT(j) - EOT(i) - d(i, j) Free Float (i, j) = EOT(j) - EOT(i) - d(i, j)

Independent Float (i, j) = EOT(j) - LOT(i) - d(i, j)

SCHEDULING WHEN RESOURCES ARE LIMITED

Critical activities Vs Non critical activities Two Schedules:

Early Start Schedule

All Events occur at their earliest time (EST & EFT) May have Time lags in completion of certain activities

All activities emanating from an event begin at the same time

Late Start Schedule

All Events occur at their Latest time (LST & LFT)

Certain activities may start after a time lag

All activities leading to an event complete at the same time

Problem 1 Scheduling to match availability of Manpower

Resource Constraint - only 12 men available for the project
2

2 days (b) 2

1 day (e) 6

4
2 days (c)

Event

EOT

LOT

Activity

Duration

EST

EFT

a(1-2)

10

2
3 4 5

1
2 5 5

3
2 5 5

b(1-3)
c (1-5) d(2-5) e(3-5) f(3-4)

2
8 4 6 5

0
0 1 2 2

2
2 3 3 5

Problem- 2 Scheduling to match the release of funds

Activity (1-2) Duration in months 13 Cost per Month 200,000 Cost Rs. 2,600,000

(1-3)
(2-4) (3-4) (2-5) (4-5)

12
2 8 15 2

500,000
1,000,000 250,000 100,000 750,000

6,000,000
2,000,000 2,000,000 1,500.000 1,500,000

Total Cost = 15,600,000 Resource Constraint: Release of funds 1st year - 6,900,000 2nd year - 6,800,000 3rd year - 1,900,000

Release of funds: 1st year - 6,900,000

2nd year - 6,800,000

Early Finish Time 13 12 15 20 28 22

3rd year - 1,900,000

Latest Finish Time 13 18 26 26 28 28

Activity ( i, j )

Duration (Months)

Early Start Time

Latest Start Time

(1 - 2) (1 - 3) (2 - 4) (3 - 4) (2 - 5) (4 - 5)

13 12 2 8 15 2

0 0 13 12 13 20

0 6 24 18 13 26

Variability of Project duration by using PERT MODEL

Measures of Variability Steps involved in calculating the Standard deviation of the duration of critical path: Determine the standard deviation of the duration of each activity on the critical path Determine the standard deviation of the total duration of the critical path. Formula to calculate the standard deviation of each activity is,

- standard deviation tp - pessimistic time to - optimistic time

CONT..

Variance = 2 Variance = Sum of variances of activity durations on critical path. Simple Example:
Optimistic time(weeks)
Accountant X Accountant Y

Most likely time

4 4

Pessimistic time
5 7

Duration 4 4

3 1

Variance for X is 2 = ((5-3)/6)2 = 0.11 Variance for X is 2 = ((7-1)/6)2 = 1 Y is less certain than X, so accept the contract with X

CONT

Probability of completion by a specified date:

Z Probability distribution of completing a project on the specified date job D Specified date to complete a job T Mean Standard deviation for critical path duration Simple Problem: If the project has a critical duration of 28 weeks and its standard deviation is 3.07, then what is the probability of completing a project in 20 days. Probability of completing project in 20 days is Z=(20-28)/3.07 Z = -2.6 From cumulative probability distribution table Z(-2.6) = 0.005

CPM MODEL

Focus of CPM analysis is on variations in activity times as a result of changes in resource assignments.

Main thrust of CPM is on time-cost relationships

CPM find the project schedule which have minimum total cost. Assumptions in CPM analysis:

Cost associated with the project is of two components, Direct costs and
Indirect costs.

Crashing Project can be expedited which involves employing more

resources.

Time and Direct Cost of the project are inversely proportional Indirect cost and time are directly proportional

COST - TIME LINE

Crashing activity
Crash cost Slope = crash cost per unit time Normal Activity

Normal cost Crash time

Normal time Activity time

INDIRECT COSTS

Indirect Cost of Project

Project Duration

PROCEDURE

Obtain the critical path in the normal network. Determine the project duration and direct cost.

Examine the cost-time slope of activities on the critical path obtained and crash the activity which has the least slope.

Identify the new critical path after crashing, now determine the
project duration and cost.

Repeat steps 2 and 3 till activities on the critical path are crashed.

PROBLEM ON CRASHING

Indirect cost Rs 2000 per week

Normal time 8 5 9 7 5 3 6 10 9 Crash time 4 3 6 5 1 2 1/2 2 7 5 Normal Cost 3000 4000 4000 2000 8000 10000 4000 6000 4200 45200 Crash Cost 6000 8000 5500 3200 12000 11200 6800 8700 9000 70400 Cost to expedite per week 750 2000 500 600 1000 2400 700 900 1200

Activity 1-2 1-3 2-4 3-5 2-5 4-6 5-6 6-7 5-7

PROJECT DURATION AND TOTAL COST

Exhibit A B Activities Crashed None (2-4) Project duration in weeks 30 29 Total direct costs 45,200 46,700 Total Indirect costs 60,000 58,000 Total Cost 1,05,200 1,04,700

C
D E F G

(2-4) and (5-6)

(1-2),(2-4) and (5-6) (1-2),(2-4),(5-6) and (6-7) (1-2),(2-4),(3-5),(5-6) and (6-7) (1-2),(2-4),(3-5), (5-6), (4-6) and (6-7)

27
24 21 20 19 1/2

49,500
52,500 55,200 56,400 57,600

54,000
48,000 42,000 40,000 39,000

1,03,500
1,00,500 97,200 96,400 96,600

COST CONTROLLING

Basic Principle of NCS: Costs are planned, measured, analyzed and controlled in terms of

project activities.

Network Cost System Cost Projection Analysis and Control of costs

Monitoring and Control of cost:

Costs incurred to date Budgeted Costs to date Value of work done to date Cost over-run(under-run) to date Time over-run(under-run) to date

EXAMPLES TIME & COST, BUDGET & ACTUAL

EG 1: If a budgeted cost for the particular activity is Rs.1,000 and it should be completed in 1day. The actual cost incurred is Rs.800 for completing the 2/3rd of work in 1day. What is the cost variance?

Thank You