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OPERATIONS RESEARCH
PROJECT MANAGEMENT USING NETWORK ANALYSIS

LEARNING OBJECTIVES OF THE MODULE:

By the end of this module we will learn about:

• Projects, their Management and Terminology used
• Construction of project networks
• Project management techniques: CPM and PERT
• CPM - Determination of minimum project duration
- Flexibility in executing project activities
- Shortening (Crashing) the project duration
• PERT- Handling probabilistic activity-time estimates

‘Project’ is not a new word for any of us. We read about new technology development (3G
mobiles, vaccine for H1N1), Implementation of new transport system (Metro, Petronet),
Quality improvement program (TEQIP), New civil construction (stadium, factory), etc. The
common features among these entitle them to be called as Projects.

Definition of Project: A project is a temporary endeavor with a collection of interrelated

activities with each activity consuming time and resources. It is designed to achieve a specific
and unique outcome and is subject to time, cost and quality constraints.

Project Management (PM):

Proper planning, scheduling, executing and controlling of project activities is required to

ensure that the projects are completed within the stipulated time and budget, complying to all
quality and safety requirements. A good PM utilizes the resources most effectively.

Several analytical techniques such as PERT, CPM, PEP, RAMPS have been developed to aid
real time project management.

The phases that comprise PM can be identified as (i) Project planning, (ii) Project scheduling
and (iii) Project executing and Controlling.

Project Planning phase involves :

• Set ting project objectives and scope
• Preparing Work Breakdown Structure (WBS)
• Estimating activity time and resource requirements
• Identifying the interrelationships between activities
• Arranging activities for network analysis
Project Scheduling involves:
• Determining the start and finish times for each activity
• Determining the critical path and flexibility in each activity

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• Communicating schedule using visual aids (Gantt chart)

Project Executing and Controlling involves:
• Carry out the project activities as per plan and schedule
• Periodically evaluate and correct the project progress
• Crash project duration if necessary (resource reallocation)
An effective feedback system should be present to take into account the realities on site and
incorporate the changes, if any, into the project plan updating it.

Pictorial representation of Phases of Project Planning and Scheduling

Terms used in network analysis:

WBS: Break down the project into constituent activities such that each activity is clearly
identifiable and manageable
Activity: This is a physically identifiable part of the project that consumes time and
resources. It is represented by an arrow (in AOA diagrams)
Events (node): These are the beginning or end points of an activity. Event is a point in time
and does not consume any time or resource and is represented by a circle.
Path: This is a continuous chain of activities from the beginning to the end of the project
Network: A graphical representation of logically and sequentially arranged arrows and nodes
of a project. It indicates the interrelationships between the activities of a project
AOA (Activity-On-Arrow) Diagram: A network with
activities represented on arrows and event on nodes.
Often dummy arrow is needed to establish precedence
relationship which makes the network a little
cumbersome and requires greater computation. But it is
easily understandable.

AON (Activity-On-Node) Diagram: A network

with activities represented on Nodes. Arrows
indicate only the interdependencies between
them. The use of dummy activities can be
avoided

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Network Construction:

Know the Interrelationships: For a network representation of a project, first we need to

know the interrelationships between activities such as (i) Which activities follow a given
activity (successors) ?, (ii) Which activities precede a given activity (predecessors) ? and (iii)
Which activities can be executed concurrently with a given activity ?
Know the Guidelines for Construction: Then we need to follow the rules given below. (i)
Activities progress from left to right (Time flows rightwards), (ii) Each activity is represented
by only one straight and solid arrow, (iii) No two activities can be identified by the same end
events, (iv) An activity which shows the logical relationship between its immediate
predecessor and successor activities, but does not consume time and resources is represented
by a dummy activity (dashed-line arrow), (v) Arrows should not cross each other as far as
possible and (vi) Avoid Curved arrows, Dangling arrows, and Looping of network
Know to Number the events: (i) The initial event with only outgoing arrows and no
incoming arrows is numbered as 1, (ii) Delete all arrows going out of event 1. This will
convert in some more events into initial ones. Number them 2, 3, …, (iii) Delete all arrows
going out of these events too. This will yield some more initial events. Numbering them
further as was done previously and (iv) Continue until the final node is reached which has
only incoming arrows and no outgoing arrow.

Problem 1. Draw an economical AOA n/w using the following data

Job Predecessor Job Predecessor Job Predecessor

A - F A L G, H
B - G F M J, K, L
C A H D, E N J, K, L
D A J G, H O K, J
E B, C K G, H

Problem 2. (solved in ppt). Represent the following set of activities on a network:

Activity Task Symbol Imm. Predecessor

Open the petrol tank cap A -

Add petrol (Paid service) B A

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Close the petrol tank cap C B

Open bonnet D -

Check and add engine oil (Paid E D

service)
Check radiator coolant F D

Check battery G D

Close bonnet H E,F,G

Clean the wind shield I -

Check air pressure in tires J -

Prepare bill K B,E

Collect payment L K

Critical Path Method (CPM):

CPM was developed by E I du Pont de Nemours & Co. (1957) for construction of new
chemical plant and maintenance shut-down. CPM does not incorporate uncertainties in job-
times, thus usable for projects with activities having single time estimates, which can be
arrived at with prior experience on similar projects. It assumes activity time is proportional to
the resources allocated to it (within a certain limit). CPM is mostly suitable for construction
type projects. The objective of using CPM is to determine Critical path, Minimum project
duration and Floats available with each activity.

Project Evaluation and Review Technique (PERT):

This technique was developed by the U S Navy (1958) for the POLARIS missile program.
The project involved coordination of thousands of contractors and agencies. With the help of
PERT, the project got completed 2 years ahead of schedule. PERT is suitable for Non-
repetitive projects (ex. R & D work), where job-times are not estimable with certainty a
priori. PERT uses multiple estimates of activity-time (probabilistic nature). The technique
emphasizes on the completion of various stages of a project. Jobs that may cause delays are
known in advance in terms of their variability.

Critical Path Analysis:

Problem 3. Suppose a robot building firm plans the following project. Draw the n/w and find
the Critical path

Project Activity Immediate Activity duration

predecessor in days
a Design a new robot - 20
b Build prototype units a 10
c Test prototypes b 8
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d Estimate material costs a 11

e Refine Robot design c, d 7
f Demonstrate Robot to customer e 6
g Estimate labor costs d 12
h Prepare technical proposal e 13
i Deliver proposal to customer g, h 5

Project Network:

List of all possible sequences (chain/path) of activities (Enumeration method):

Path / Sequence Total duration

a-b-c-e-f 1-2-3-5-6-8 20+10+8+7+6 = 51 days

a-b-c-e-h-i 1-2-3-5-6-7-8 20+10+8+7+13+5 = 63 days (Critical Path)

a-d-e-f 1-2-4-5-6-8 20+11+0+7+6 = 44 days

a-d-e-h-i 1-2-4-5-6-7-8 20+11+0+7+13+5 = 56 days

a-d-g-i 1-2-4-7-8 20+11+12+5 = 48 days

Problem 4. (solved in ppt). A small maintenance project consists of the following 10 jobs
whose precedence relationships are identified by their node numbers. Draw an AOA diagram
and identify the CP by enumeration method.

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Initial Node Final Node Duration (days)

1 2 2

2 3 3

2 4 5

3 5 4

3 6 1

4 6 6

4 7 2

5 8 8

6 8 7

7 8 4

Limitations of enumeration method: (i) Very difficult to use when the complexity of network
increases, (ii) No information on flexibility available with respect to activities, (iii) Difficult
to schedule activities in complex networks

Hence, we use a Structured method for Network analysis

Structured approach:

Here, CP calculations involve TWO passes

Forward pass: To determine the Earliest Occurrence (EO) times of events. The
computations start at Node 1 and advance recursively to the last Node n

Initial Step: Set EO(1) = 0, as project starts at time 0

General Steps for determine EO(j):
1. Consider separately, each node (say, i) from where an activity is directly converging
into node j
2. Add EO(i) and the corresponding activity time tij
3. Select the maximum of them as EO(j)
The forward pass is complete when EO(n) is computed

Backward Pass: To determine the Latest Occurrence (LO) times of events. The computations
start at the last Node n and end at Node 1

Backward pass starts after the Forward pass is completed

Initial Step: Set LO(n) = EO(n), as acceptable project delay is 0
General Steps for determine LO(i):

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1. Consider separately, each node (say, j) to which an activity is directly reaching from
node i
2. Subtract activity time tij from the corresponding LO(j)
3. Select the minimum of them as LO(i)
The Backward pass is complete when LO(1) is computed

An event j will be critical, if EO(j) = LO(j)

An activity ij will be Critical, if it satisfies the following three conditions:
1) EO(i) = LO(i)
2) EO(j) = LO(j)
3) LO(j) – LO(i) = EO(j) - EO(i) = tij
Otherwise the activity is Noncritical
For an activity ij , LO(j) - EO(i) gives the maximum span during which the activity may be
scheduled

Problem 5. Determine the Critical Path for the activity data given below. All durations are in
days.

Initial Node Final Node Duration (days)

1 2 5

1 3 6

2 3 3

2 4 8

3 5 2

3 6 11

4 5 0

4 6 1

5 6 12

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Calculate the floats associated with each activity using the above information

Calculation of floats associated with activities:

Total Float: The time by which an activity ij can be delayed without affecting the project
duration
TF(ij) = { [LO(j) – EO(i)] - tij }
Free Float: The time by which an activity ij can be delayed without affecting the EO(j)
FF(ij) = { [EO(j) – EO(i)] - tij
Independent Float: The time by which an activity ij can be delayed without affecting the
floats of any other activity
IF(ij) = { [EO(j) – LO(i)] - tij }
All floats are zeros for a Critical activity.
The information about the occurrences of events can be used to develop time schedule and
calculate floats for all activities

Activity t ES(ij) EF(ij) LS(ij) LF(ij) TF(ij) FF(ij) IF(ij)

ij
i-j
1-2 5 0 5 0 5 0 0 0
1-3 6 0 6 5 11 5 2 2
2-3 3 5 8 8 11 3 0 0
2-4 8 5 13 5 13 0 0 0
3-5 2 8 10 11 13 3 3 0
3-6 11 8 19 14 25 6 6 3
4-5 0 13 13 13 13 0 0 0
4-6 1 13 14 24 25 11 11 11
5-6 12 13 25 13 25 0 0 0

Problem.6. For the given project activity data, compute:

1) Critical Path
2) Early Start
3) Early Finish
4) Late Start
5) Late Finish
6) Total Float
7) Free Float and
8) Independent Float
Initial node Final Node Duration (days)
A B 9
A C 3
B C 2
B D 14

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C D 8
C E 2
C F 7
D G 5
E G 6
E H 4
F H 4
G H 6
G I 2
H I 6

Node i Node j Durn. ES EF LS LF TF FF

F IF
A B 9 0 9 0 9 0 0 0
A C 3 0 3 12 15 12 8 8
B C 2 9 11 13 15 4 0 0
B D 14 9 23 9 23 0 0 0
C D 8 11 19 15 23 4 4 0
C E 2 11 13 20 22 9 0 -4
C F 7 11 18 23 30 12 0 -4
D G 5 23 28 23 28 0 0 0
E G 6 13 19 22 28 9 9 0
E H 4 13 17 30 34 17 1
15 8
F H 4 18 22 30 34 12 1
12 0
G H 6 28 34 28 34 0 0 0
G I 2 28 30 38 40 10 1
10 10
H I 6 34 40 34 40 0 0 0

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Crashing Project Duration:

In many situations it becomes ne necessary to cut down the project duration. How ccan it be
done? Activities that are criticall nneed to be crashed in order to reduce the project
ct duration as
it is these activities that determin
ine the project duration. But this has got its own cost
c
implications. Reduction in projec ject duration calls for more resources to be pumpeped in and
hence, the direct costs increase.. W Whereas indirect costs such as equipment rent,, supervision
s
charges, etc. reduce. Thus, it beco
ecomes necessary to identify a project duration up to which the
project can be crashed so that ove ver all project costs are minimum.

Problem.7. Find the lowest cost

st schedule of the following project given the over
erhead
expenses as Rs.45,000/- per day.
y.

Activity Normal Crash Cost of crashing (x1000

duration duration Rs/day)
1-2 3 1 40

2-3 4 2 40

2-4 7 3 10

3-4 5 2 20

Solution: Draw a squared netwoork placing the CP at the centre.

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Activity Days Proj. Cost of crashing Total Cost Over- Total Cost
crashed saved duration of crashing heads

None 0 12 0 0 540 540

3-4 2 10 2x20=40 40 450 490

3-4 & 2-4 1 9 (20+10)x1=30 70 405 475

1-2 2 7 40x2=80 150 315 465

2-3 &2-4 2 5 (40+10)x2=100 250 225 475

The lowest cost schedule is the plan corresponding to project duration of 7 days.

Problem.8. Table below gives the time and cost data with respect to normal and crash
periods of a project. (a) Draw the n/w of the project, (b) What is the normal duration and cost
of the project? (c) Determine the project cost if all activities are crashed indiscriminately (d)
Determine the optimum project duration, if the indirect cost is Rs. 150/day

Activity Normal time Normal cost Crash time Crash cost

(days) (Rs.) (days) (Rs.)
1-2 3 360 2 400
2-3 6 1400 4 1600
2-4 9 2000 5 2600
2-5 7 1000 5 1500
3-4 8 400 4 600
4-5 5 1600 3 2000
5-6 3 500 2 750
a)

Critical path : 1 – 2 – 3 – 4 – 5 – 6

b) Normal Project Duration : 25 days

Normal cost of the project is 7,260 + 3,750 = 11,010

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c) Cost of the project if all activities are crashed indiscriminately:

= Rs.9,450 + 2,250 = 11,700

d) Now draw a squared network as shown below. Choose the activities on the critical path to
crash such that the present critical path continues to remain as (at least one of) the critical
path. Also the cost of crashing/day shall be the least among available options at any stage.

Thus the final crashed network appears as below. The associated cost table is also shown.

Activity Days saved Project Direct Overheads Total project

crashed (days) durn (days) cost (Rs.) (Rs.) cost (Rs.)
None 0 25 7260 3750 11,010

1-2 1 24 7300 3600 10,900

3-4 4 20 7500 3000 10,500

2-3 1 19 7600 2850 10,450

4-5 2 17 8000 2,550 10,550

2-3 & 2-4 1 16 8,250 2,400 10,650

5-6 1 15 8,500 2,250 10,750

The table shows that the project duration of 19 days is most economical and optimum.

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Program Evaluation and Review Technique (PERT)

Used in such projects where the activities are, to some extent, governed by States-of-nature
and the organization does not have full control over the activity duration and hence the time
estimates of activities are probabilistic. For example, R&D projects, projects exposed to seasonal
variations.

In PERT, we use three time estimates for an activity which reflect the degrees of uncertainty
to = Optimistic time: When environment is very favorable
tm = Most likely time: When environment is just normal
tp = Pessimistic time: When environment is very unfavorable
There can be a number of time estimates between to and tp

The frequency distribution curve of activity time ‘t’ is assumed to be a distribution which
is unimodal at tm and has extremes at to and tp. But tm need not be the mid point between to and
tp.

The expected (average) time te of an activity is calculated as a weighted average of these three
estimates.

te = (to + 4 tm + tp) / 6 where te need not be equal to tm

How reliable te is? How confident are we that the activity gets over in time te? This depends
upon the spread of the distribution of ‘t’ or variability of ‘t’. Larger the variation, lesser
would the confidence. Example: Distributions with same mean but different spreads

Variance ( 2)’ and ‘Standard deviation ( )’ are two important measures of variability. In
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PERT, variance of an activity is calculated as: = [(tp- to)/6]2

Using te s, the earliest and latest occurrences of each event are calculated from which the CP
is determined

Te = (te of all critical activities)

2 2
p = ( of all critical activities)

There is a possibility of alternate Critical paths. In such cases we need to consider the critical
path with greater variance. As the analysis is based on the probabilistic time estimates even
near Critical paths should be carefully examined.

When activity times (‘tj’ for j= 1, 2,…n) are independent and identically distributed random
variables, then (by Central limit theorem) project duration (T) will follow normal distribution

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with expected project duration Te and project variance p2 . With Te and p we can compute
the probability of completing the project within a due date using normal PD tables.

Problem 9. Given the list of activities in a project and their time estimates (in days):
a) Draw the project network,
b) Determine the critical path(s) and the expected project duration
c) What is the probability that project will be completed in 35 days?
d) What due date has 90% chance of being met?

Activity t t t
o m p

1-2 6 12 30

1-3 3 6 15

1-4 3 9 27

2-6 4 19 28

3-5 3 9 27

3-6 2 5 8

4-5 1 4 7

5-6 6 12 30
a)

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b)

Activity t
e
Critical path = 1 – 3 – 5 – 6
1-2 12
1-3 7 Expected project duration T = 32 days
e

1-4 11
2-6 18
3-5 11
3-6 5
4-5 4
5-6 14
c)

2
Activity t t t CA
o m p

1-2 6 12 18 4

1-3 3 6 15 1-3 4
1-4 3 9 27 16
2-6 4 19 28 16
3-5 3 9 27 3-5 16
3-6 2 5 8 1
4-5 1 4 7 1
5-6 6 12 30 5-6 16

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2
Variance = 36 days
p
Standard deviation = 36 = 6 days
p
Expected duration of the project Te = 32 days
Std. deviation of project duration p = 6 days
Scheduled duration Ts= 35 days
We know, Z = (Ts – Te)/ p
= (35-32)/6 = +0.5

The area under the normal curve (from standard normal PD table) up to Z = +0.5
= 0.6915 (i.e. 69.15 % chance)
The probability that project will be completed in 35 days is 0.6915

d)
We know, Z = (Ts – Te)/ p
For 90% chance (probability = 0.9) area under the std. normal curve, we have Z = +1.28
+1.28 = (Ts - 32)/6
Hence, Ts = 39.68 days
Project duration of 39.68 days has 90% chance of being met

Advantages and Limitations of PERT/CPM

Advantages:
• Simple to understand and use
• Show whether the project is on schedule; or behind/ ahead of the schedule
• Identify the activities that need closer attention (critical)
• Determine the flexibility available with activities
• Show potential risk with activities (PERT)
• Provide good documentation of the project activities
• Help to set priorities among activities and resource allocation as per priority

Limitations:
• Demand clearly defined and stable activities
• Precedence relationship should be known in advance
• Overemphasis on Critical path
• Activity time estimates are subjective
• Activity times in PERT may not follow Beta PD in reality
• Cost of crashing an activity may not be linear

Some Computer Software Available for Network Analysis

• Microsoft Project (Microsoft Corp.)
• PowerProject (ASTA Development Inc.)
• Primavera Project Planner (Primavera)

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