OPERATIONS RESEARCH
LECTURE NOTES
“PROJECT MANAGEMENT”
Assoc. Prof. Dr. Y. İlker Topcu
Acknowledgements:
I would like to acknowledge Prof. W.L. Winston's "Operations Research: Applications and Algorithms“
(slides submitted by Brooks/Cole, a division of Thomson Learning, Inc.) and Prof. J.E. Beasley's
lecture notes which greatly influence these notes...
I retain responsibility for all errors and would love to hear from readers...
www.isl.itu.edu.tr/ya
Assoc. Prof. Dr. Y. İlker Topcu (www.ilkertopcu.net)
CONTENTS
PROJECT MANAGEMENT
1. CONCEPTS ............................................................................................................. 2
2. THE PROJECT NETWORK..................................................................................... 3
3. CPM/PERT............................................................................................................... 4
3.1 CPM .................................................................................................................................8
3.2 Crashing the Project....................................................................................................13
3.3 PERT .............................................................................................................................15
3.4 Probability Analysis for CP.........................................................................................17
Assoc. Prof. Dr. Y. İlker Topcu (www.ilkertopcu.net)
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PROJECT MANAGEMENT
1. CONCEPTS
Organizations perform work – either operations or projects.
Shared characteristics of projects and operations:
• Performed by people
• Constrained by limited resources
• Planned, executed and controlled
Operations and projects differ:
• Operations are ongoing and repetitive
• Projects are temporary and unique
“A project is a temporary and intensely serious attempt undertaken to create a unique
product or service.”
temporary - definite beginning and end
unique - different in some distinguishing characteristic
Resources used in projects are time, finance, labor, materials, tools & machinery, and
personnel.
Project Examples:
• Developing a new product or service
• Effecting a change in structure, staffing, or style of an organization
• Designing a new transportation vehicle
• Constructing a building or facility
• Running a campaign for political office
• Implementing a new business procedure or process
Management is generally perceived to be concerned with planning, organization, and
control of an ongoing process or activity.
Assoc. Prof. Dr. Y. İlker Topcu (www.ilkertopcu.net)
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Project Management reflects a commitment of resources and people to a typically
important activity for a relatively short time frame, after which the management effort is
dissolved.
Project management is the application of knowledge, skills, tools, and techniques to
project activities in order to meet or exceed stakeholder needs and expectations from a
project.
Meeting or exceeding stakeholder needs and expectations invariably involves balancing
competing demands among:
• Scope, time, cost, and quality
• Stakeholders with differing needs and expectations
• Identified needs and unidentified expectations - “client relations challenge”
Project Planning
1. Determining objectives
2. Defining the project
3. Determining activity requirements
4. Organizing teams
Project Scheduling
1. Assigning resources to activities
2. Arranging relations between activities
3. Updating and revising on regular basis
Project Controlling
Before Project 1. Monitoring resources, costs,
quality, and budgets
During Project 2. Revising and changing plans
3. Shifting resources to meet
demands
2. THE PROJECT NETWORK
Consisted of nodes and directed arcs
Shows the relation between activities
Has two types:
• Arc Diagrams (Activity on Arc – AOA)
Arcs represent the activities,
Nodes represent the beginning and termination of activities (events).
• Block Diagrams (Activity on Node – AON)
Nodes represent activities,
Arcs represent precedence relations between activities.
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Example 1. Network
Assume a project of 5 activities.
Activities A and B are predecessors of activity C.
B is predecessor of D.
C is predecessors of E.
Answer
ARROW DIAGRAM
BLOCK DIAGRAM
3. CPM/PERT
Network models can be used as an aid in the scheduling of large complex projects that
consist of many activities.
If the duration of each activity is known with certainty, the Critical Path Method (CPM)
can be used to determine the length of time required to complete a project.
• CPM can also be used to determine how long each activity in the project can be
delayed without delaying the completion of the project.
• It was developed in the late 1950s by researchers at DuPont and Sperry Rand.
If the duration of activities is not known with certainty, the Program Evaluation and
Review Technique (PERT) can be used to estimate the probability that the project will
be completed by a given deadline.
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• PERT was developed in the late 1950s by consultants working on the
development of the Polaris missile.
Application Examples for CPM/PERT
• Scheduling construction projects such as buildings, highways, and airports...
• Installing new computer systems
• Designing and marketing new products
• Completing corporate mergers
• Building ships
• Developing countdown and hold procedure for the launching of space crafts
Six Steps Common to CPM/PERT
1. Define the project and all significant activities.
2. Develop relationships among the activities. Identify precedence relationships.
3. Draw the network.
4. Assign time and/or cost estimates to each activity.
5. Compute the longest time path (critical path) through the network.
6. Use the network to help plan, schedule, monitor, and control the project.
Questions Addressed by CPM/PERT
• When will the project be completed?
• What are the critical activities or tasks in the project?
• Which are the non-critical activities?
• What is the probability that the project will be completed by a specific date?
• Is the project on schedule, ahead of schedule, or behind schedule?
• Is the project over or under the budgeted amount?
• Are there enough resources available to finish the project on time?
• If the project must be finished in less than the scheduled amount of time, what is the
best way to accomplish this at least cost?
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Advantages of CPM/PERT
• Useful at several stages of project management
• Straightforward in concept, not mathematically complex
• Uses graphical displays employing networks to help user perceive relationships
among project activities
• Critical path and slack time analyses help pinpoint activities that need to be closely
watched
• Networks generated provide valuable project documentation and graphically point
out who is responsible for various project activities
• Applicable to a wide variety of projects and industries
• Useful in monitoring not only schedules, but costs as well
Limitations of CPM/PERT
• Project activities must be clearly defined, independent, and stable in their
relationships
• Precedence relationships must be specified and networked together
• Time activities in PERT are assumed to follow the beta probability distribution -- must
be verified
• Time estimates tend to be subjective, and are subject to fudging by managers
• There is inherent danger in too much emphasis being placed on the critical path
Utilization of CPM/PERT
To apply CPM or PERT, we need a list of activities that make up the project.
The project is considered to be completed when all activities have been completed.
For each activity there is a set of activities (called the predecessors of the activity) that
must be completed before the activity begins.
A project network (project diagram) is used to represent the precedence relationships
between activities Æ AOA representation of a project
Given a list of activities and predecessors, an AOA representation of a project can be
constructed by using the following rules.
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• Node 1 represents the start of the project. An arc should lead from node 1 to
represent each activity that has no predecessors.
• A node (called the finish node) representing the completion of the project should be
included in the network.
• Number the nodes in the network so that the node representing the completion time
of an activity always has a larger number than the node representing the beginning
of an activity.
• An activity should not be represented by more than one arc in the network
• Two nodes can be connected by at most one arc.
To avoid violating last two rules, it can be sometimes necessary to utilize a dummy
activity that takes zero time.
Example 2. Widgetco
(Winston 8.4., p. 433)
Widgetco is about to introduce a new product (product 3). A list of activities and their
predecessors and of the duration of each activity is given.
Draw a project network for this project.
Activity Predecessors Duration(days)
A:train workers - 6
B:purchase raw materials - 9
C:produce product 1 A, B 8
D:produce product 2 A, B 7
E:test product 2 D 10
F:assemble products 1&2 C, E 12
Answer
C8 F 12
3 5 6
A6
D7 E 10
1 Dummy
Node 1 = starting node
Node 6 = finish node
B9
2 4
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3.1 CPM
Two key building blocks in CPM:
The early event time for node i, represented by ET(i), is the earliest time at which the
event corresponding to node i can occur.
The late event time for node i, represented by LT(i), is the latest time at which the event
corresponding to node i can occur without delaying the completion of the project.
EARLY EVENT TIME
Note that ET(1) = 0
Then compute ET(2), ET(3), and so on...
Stop when ET(n) has been calculated (n: finish node)
Computation of ET(i):
• Find each prior event to node i that is connected by an arc to node i. These are
immediate predecessors.
• To the ET for each immediate predecessor of the node i, add the duration of the
activity connecting the immediate predecessor to node i.
• ET(i) equals the maximum of the sums computed in previous step.
Example 3. ET
Suppose that for the segment of the project network given below we have already
determined
ET(3)=6, ET(4)=8, and ET(5)=10
3
8
4 4 6
3
Answer
ET(6) = max {ET(3)+8, ET(4)+4, ET(5)+3} = max {14, 12, 13} = 14
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Example 4. ET(i)s for Widgetco
ET(3)=9 ET(5)=26 ET(6)=38
3 5 6
8 12
6
7 10
1 0
9
ET(1)=0
2 4
ET(2)=9 ET(4)=16
LATE EVENT TIME
Work backward, begin with the finish node
Note that LT(n) = ET(n)
Then compute LT(n-1), LT(n-2), ... LT(1).
Computation of LT(i):
• Find each node that occurs after node i and is connected to node i by an arc.
These events are immediate successors of node i.
• From the LT for each immediate successor to node i, subtract the duration of the
activity.
• LT(i) is the smallest of the differences determined in previous step.
Example 5. LT
Suppose that for the segment of the project network given below we have already
determined
LT(5)=24, LT(6)=26, and LT(7)=28
5
3
4 4 6
5
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Answer
LT(4) = min {LT(5)–3, LT(6)–4, LT(7)–5} = min {21, 22, 23} = 21
Example 6. LT(i)s for Widgetco
LT(3)=9 LT(5)=26 LT(6)=38
3 5 6
8 12
6
7 10
1 0
9
ET(1)=0
2 4
LT(2)=9 LT(4)=16
TOTAL FLOAT
Before the project is begun, the duration of an activity is unknown, and the duration of
each activity is used to construct the project network is just an estimate of the activity’s
actual completion time.
The concept of total float of an activity can be used as a measure of how important it is
to keep each activity’s duration from greatly exceeding our estimate of its completion
time.
For an arbitrary arc representing activity (i,j), the total float, represented by TF(i,j), of the
activity is the amount by which the starting time of activity (i,j) could be delayed beyond
its earliest possible starting time without delaying the completion of the project
(assuming no other activities are delayed).
Equivalently, TF(i,j) is the amount by which the duration of the activity can be increased
without delaying the completion of the project.
TF(i,j) = LT(j) – ET(i) – tij
Example 7. TF(i,j)s for Widgetco
Activity B: TF(1,2) = LT(2) – ET(1) – 9 = 0
Activity A: TF(1,3) = LT(3) – ET(1) – 6 = 3
Activity D: TF(3,4) = LT(4) – ET(3) – 7 = 0
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Activity C: TF(3,5) = LT(5) – ET(3) – 8 = 9
Activity E: TF(4,5) = LT(5) – ET(4) – 10 = 0
Activity F: TF(5,6) = LT(6) – ET(5) – 12 = 0
Dummy activity: TF(2,3) = LT(3) – ET(2) – 0 = 0
FINDING A CRITICAL PATH
If an activity has a total float of zero, then any delay in the start of the activity will delay
the completion of the project:
An activity with a total float of zero is a critical activity.
A path from node 1 to the finish node that consists entirely of critical activities is called a
critical path.
Example 8. Critical Path for Widgetco
TF(1,2) = 0
TF(1,3) = 3
TF(2,3) = 0
TF(3,4) = 0
TF(3,5) = 9
TF(4,5) = 0
TF(5,6) = 0
Widgetco critical path is 1-2-3-4-5-6
FREE FLOAT
The Free Float of the activity corresponding to arc(i,j), denoted by FF(i,j) is the amount
by which the starting time of the activity corresponding to arc(i,j) can be delayed without
delaying the start of any later activity beyond the earliest possible starting time.
FF(i,j) = ET(j) – ET(i) – tij
Example 9. FF(i,j)s for Widgetco
Activity B: FF(1,2) = 9 – 0 – 9 = 0
Activity A: FF(1,3) = 9 – 0 – 6 = 3
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Activity D: FF(3,4) = 16 – 9 – 7 = 0
Activity C: FF(3,5) = 26 – 9 – 8 = 9
Activity E: FF(4,5) = 26 – 16 – 10 = 0
Activity F: FF(5,6) = 38 – 26 – 12 = 0
For example, because FF for activity C is 9 days, a delay in the start of this activity
(occurrence of node 3) more than 9 days will delay the start of some later activity (in this
case activity F)
USING LP
LP can also be used to determine the length of the critical path.
Decision variable (xij): the time that the event corresponding to node j occurs
Note that for each activity (i,j), before node j occurs, node i must occur and activity (i,j)
must be completed Æ
xj ≥ xi + tij
Goal is to minimize the time required to complete the project: objective function Æ
min z = xn - x1
A critical path for a project network consists of a path from the start of the project to the
finish in which each arc in the path corresponds to a constraint having a dual price of -1.
For each constraint with a dual price of -1, increasing the duration of the activity
corresponding to that constraint by ∆ will increase the duration of the project by ∆.
Example 10. Using LP approach to Widgetco
min z = x6 - x1
s.t. x3 ≥ x1 + 6 (Arc (1,3) constraint)
x2 ≥ x1 + 9 (Arc (1,2) constraint)
x5 ≥ x3 + 8 (Arc (3,5) constraint)
x4 ≥ x3 + 7 (Arc (3,4) constraint)
x5 ≥ x4 + 10 (Arc (4,5) constraint)
x6 ≥ x5 + 12 (Arc (5,6) constraint)
x3 ≥ x2 (Arc (2,3) constraint)
All variables urs
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Optimal Sol’n & Report
OBJECTIVE FUNCTION VALUE
1) 38.00000
VARIABLE VALUE REDUCED COST
X6 38.000000 0.000000
X1 0.000000 0.000000
X3 9.000000 0.000000
X2 9.000000 0.000000
X5 26.000000 0.000000
X4 16.000000 0.000000
ROW SLACK OR SURPLUS DUAL PRICES
ARC (1,3) 3.000000 0.000000
ARC (1,2) 0.000000 -1.000000
ARC (3,5) 9.000000 0.000000
ARC (3,4) 0.000000 -1.000000
ARC (4,5) 0.000000 -1.000000
ARC (5,6) 0.000000 -1.000000
ARC (2,3) 0.000000 -1.000000
The project can be completed in 38 days
Critical path is 1-2-3-4-5-6
3.2 Crashing the Project
In many situations, the project manager must complete the project in a time that is less
than the length of the critical path.
LP can often be used to determine the allocation of resources that minimizes the cost of
meeting the project deadline.
This process is called crashing a project.
Example 11. Crashing Widgetco Project
Widgetco believes that to have any chance of being a success, product 3 must be
available for sale before the competitor’s product hits the market.
Widgetco knows that the competitor’s product is scheduled to hit the market 26 days
from now, so Widgetco must introduce product 3 within 25 days.
Because the project can be completed in 38 days, Widgetco will have to expend
additional resources to meet 25 day project deadline.
Suppose that by allocating additional resources to an activity, Widgetco can reduce the
duration of any activity by as many as 5 days.
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The cost per day of reducing the duration of an activity is shown below:
Activity A $10
Activity B $20
Activity C $3
Activity D $30
Activity E $40
Activity F $50
Find the minimum cost of completing the project by the 25-day deadline
Answer
Decision variables
A: # of days by which duration of activity A is reduced
...
F: # of days by which duration of activity F is reduced
xj: time that the event corresponding to node j occurs
LP
min 10A + 20B + 3C + 30D + 40E + 50F
s.t. A≤5
B≤5
C≤5
D≤5
E≤5
F≤5
x3 ≥ x1 + 6 – A
x2 ≥ x1 + 9 – B
x5 ≥ x3 + 8 – C
x4 ≥ x3 + 7 – D
x5 ≥ x4 + 10 – E
x6 ≥ x5 + 12 – F
x3 ≥ x2
x6 – x1 ≤ 25
A, B, C, D, E, F ≥ 0; xj urs
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Optimal Sol’n & Report
z = 390, A = 2, B = 5, C = 0, D = 5, E = 3, F = 0
x1 = 0,x2 = 4,x3 = 4,x4 = 6,x5 = 13,x6 = 25
After reducing the durations of project A, B, D, and E by the given amounts in the
optimal solution, the project deadline of 25 days can be met for a cost of $390.
Project Network & Critical Path
(4,4) (13,13) (25,25)
3 5 6
A4 C8 F 12
D2 E7
1 0
B4
(0,0)
2 (4,4) 4 (6,6)
Critical path is 1-2-3-4-5-6 or 1-3-4-5-6
3.3 PERT
CPM assumes that the duration of each activity is known with certainty. For many
projects, this is clearly not applicable.
PERT is an attempt to correct this shortcoming of CPM by modeling the duration of each
activity as a random variable.
For each activity, PERT requires that the project manager estimate three quantities:
• optimistic duration (a)
• pessimistic duration (b)
• the most likely value for duration (m)
Let Tij be the duration of activity (i,j).
PERT requires the assumption that Tij follows a beta distribution.
According to this assumption, it can be shown that the mean and variance of Tij may be
approximated by :
E(Tij) = (a + 4m + b) / 6
var Tij = (b – a)2 / 36
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Beta Probability Distribution:
PERT requires the assumption that the durations of all activities are independent.
In this case, the mean and variance of the time required to complete the activities on any
path are given by
∑ E (T )
( i , j )∈path
ij ∑ var T ij
( i , j )∈path
Let CP be the random variable denoting the total duration of the activities on a critical
path found by CPM.
PERT assumes that the critical path found by CPM contains enough activities to allow
us to invoke the Central Limit Theorem and conclude that the following is normally
distributed:
CP = ∑ Tij
( i , j )∈critical path
Example 12. Modified Widgetco
Suppose that for Widgetco example a, b, and m for each activity are given as follows.
Activity a b m
(1,2) 5 13 9
(1,3) 2 10 6
(3,5) 3 13 8
(3,4) 1 13 7
(4,5) 8 12 10
(5,6) 9 15 12
Calculate the expected completion time and the variance of the project.
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Answer
E(T12) = (5+13+9×4)/6 = 9, varT12 = (13-5)2/36 = 1.78
E(T13) = 6 varT13 = 1.78
E(T35) = 8 varT35 = 2.78
E(T34) = 7 varT34 = 4
E(T45) = 10 varT45 = 0.44
E(T56) = 12 varT56 = 1
E(T23) = 0 varT23 = 0
Project Network & Critical Path
(9,9) (26,26) (38,38)
3 5 6
6 8 12
7 10
1 0
9
(0,0)
2 (9,9) 4 (16,16)
Critical path: 1-2-3-4-5-6
E(CP) = 9 + 0 + 7 + 10 + 12 = 38
varCP = 1.78 + 0 + 4 + 0.44 + 1 = 7.22
standard deviation for CP = (7.22)1/2 = 2.69
3.4 Probability Analysis for CP
Example 13. CP Analysis for Widgetco
What is the probability that Modified Widgetco project will be completed within 35 days?
Answer
Standardizing and applying the assumption that CP is normally distributed, we find that
Z is a standardized normal random variable with mean 0 and variance 1.
Using standard normal cumulative probabilities (Winston 12.6, p. 724-725):
P(CP≤35) = P[(CP-38)/2.69 ≤ (35-38)/2.69)] = P(Z≤–1.12) = 0.1314
Thus, the probability that the project will be competed within 35 days is 13.14%.
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