Chapter 8

Part 1: Advanced Network Analyses &

Scheduling: CPM
Project Management for Engineering,
Business, and Technology

Prepared by
John Nicholas, Ph.D.
Loyola University Chicago
&
Herman Steyn
University of Pretoria
Advanced Network Analyses & Scheduling

◼ In Chapter 7 we assumed that activity

durations are known and fixed while in
practice they are merely estimates and thus
variable

◼ This chapter addresses variability of activity

duration, tradeoffs between cost and time, as
well as ways to reduce project duration
Advanced Network Analyses & Scheduling

◼ What happens when a project takes too long?

❑ Estimated completion time exceeds required target
date)
❑ The project is under way but is falling behind
schedule

◼ How do we shorten project duration?

◼ By how much can project duration be
shortened?
Time – Cost Tradeoff
The house built in less than 4 hours
Time – Cost Tradeoff
The house built in less than 4 hours
Specifications:
◼ Four bedrooms

◼ Pre-fabricated wall panels on established foundation

◼ Wooden floor, roof (steel), ceilings, decks & steps

◼ Doors, windows, a bath, toilet, plumbing & electrical

◼ Painted walls, ceilings & window frames

◼ Carpets & curtains

◼ Front path & a letter box

◼ Clothes line, wooden fence

◼ 3 trees planted, lawns leveled and grassed.
Time – Cost Tradeoff
The house built in less than 4 hours
External walls being constructed
Time – Cost Tradeoff
The house built in less than 4 hours
Internal walls & kitchen cabinets under construction

Construction team:
150 people!
Completed house
New Zealand
In 3 hours and 45 minutes
Time – Cost Tradeoff (cont’d)
How do we reduce project duration?
Focus on the Critical Path
◼ Reduce amount of work (scope, requirements)
◼ Use appropriate technology
◼ Pay attention to motivation of project team
◼ Get support from executives and other
stakeholders
◼ Use more sophisticated / expensive resource(s)
◼ Use more resources to complete work in less time
Time – Cost Tradeoff (cont’d)
◼ In certain cases, activity duration is fixed and
more resources won’t help reduce duration
◼ In other cases, activity duration can be
reduced by using more or better resources

◼ Better / more resources normally cost more

(activity duration is a function of cost)
 Time – Cost Tradeoff (cont’d)

◼ The method to trade off time and cost is called

“Critical Path Method” or CPM (although
general methods to determine float are
sometimes also referred to as CPM)

◼ Developed in the chemical industry in 1957 for

DuPont Company (chemical plant construction)
Time – Cost Tradeoff (cont’d)
Where the use of more costly resources would
reduce duration
❑ In some cases, two conditions only. Examples:
◼ Either walk or take a cab
◼ Chose between going by car or by airplane
The two conditions:
◼ “normal” alternative – walk

◼ “crash” alternative – take cab (more costly but faster)

❑ In other cases, in-between possibilities do exist

(E.g. walk half the way and take cab for the other half)
Time – Cost Tradeoff (cont’d)
Cases where activity duration can be reduced
by using more or better resources
❑ Use more (e.g. temporary) people
❑ Make use of overtime at a higher hourly cost
❑ Use high technology instead of low
technology
❑ Ground moving equipment instead of manual
labor
❑ …
Time – Cost Tradeoff (cont’d)
The points of “normal” and “crash” are the
extreme alternatives:
❑ Normal: whatever work effort is considered
“normal”
❑ Crash: maximum resources applied to obtain
shortest time
❑ Normal effort is least costly
❑ Crash effort is most costly
Time – Cost Tradeoff (cont’d)
Where the use of more costly resources
would reduce duration

Both the Normal time (Tn) and Crash time (Tc)

are fixed values:

In its simplest form, the CPM time-cost

tradeoff does not take variability (other than
that relating to cost) into account:
T = ƒ($)
T ≠ ƒ(Murphy)
Time – Cost Tradeoff (cont’d)
Consider activity durations and direct costs for
“Normal” and “Crash” conditions
Cc = Crash cost
Cn = Normal cost
crash
Tc = Crash time
Direct Cost

x
Cc
Tn = Normal time

normal
Cn x

Tc Time Tn
Time – Cost Tradeoff (cont’d)
Where in-between possibilities exist, assume a
straight line (not stepwise, concave or convex)
cost = ΔC =
Cc - Cn
crash slope Tc - Tn
ΔT
Direct Cost

x
Cc

normal
Cn x

Tc Time Tn
Time – Cost Tradeoff (cont’d)

◼ Cost slope is marginal change in cost per unit

change in time

◼ Slope is negative since cost increases as time

decreases, and vice versa

◼ We will ignore the negative sign (use the absolute

value )
Time – Cost Tradeoff (cont’d)
Page 239
 Time – Cost Tradeoff (cont’d)
◼ In a project network, where do we reduce
work or add resources?

C, 2

A, 1 E, 2 G, 6
16 days
Start D, 7
End
B, 3 F, 3 H, 1
 Time – Cost Tradeoff (cont’d)
C, 2

A, 1 E, 2 G, 6
16 days
Start D, 7
End
B, 3 F, 3 H, 1

◼ Answer: Always on the Critical Path

◼ Cutting work or adding resources anywhere

else will have no effect on project completion
 Time – Cost Tradeoff: Example

◼ Estimated completion time: 16 days

◼ Suppose 16 is too long. To shorten project,
must either reduce work or add resources
among activities A, D, E, and G
Time – Cost Tradeoff: Example
◼ Suppose we cannot cut out any work, so we
have to add resources. To which activity?
A, D, E, or G?
◼ Consider the cost of these alternatives
Time – Cost Tradeoff: Example
Normal Crash Cost
Activity Tn Cn Tc Cc Slope
A 1 50 1 50 --
B 3 100 2 105 5
C 2 80 1 95 15
D 7 150 2 200 10
E 2 90 1 100 10
F 3 110 2 120 10
G 6 180 1 255 15
H 1 60 1 60 --
Direct cost 820 985
Time – Cost Tradeoff: Example
Activity Cost
◼ Project takes 16 days and costs $820 Slope
A --

◼ To reduce duration, add resources to B 5

activity on CP with smallest cost slope C 15
D 10
❑ Activity A cannot be reduced
E 10
❑ D and E have slopes of only $10/day
F 10
❑ Let’s pick D, arbitrarily. Reduce from 7 to G 15
6 days
H --
 Time – Cost Tradeoff: Example
Reduce duration of D from 7 to 6 days

C, 2

A, 1 7→6 E, 2 G, 6
16 →15
Start D, 6
End
B, 3 F, 3 H, 1
Time – Cost Tradeoff: Example
Activity Cost
Slope
◼ Reducing D by 1 day adds $10 to A --
cost of project B 5
C 15

◼ This is a “direct cost” (DC) D 10

E 10
so direct cost of project increases to F 10
G 15
H --
DC = 820 + 10 = $830
Time – Cost Tradeoff: Example

How far can an activity be reduced?

❑ Either to its crash time,
❑ Until a parallel non-critical path becomes
critical,
❑ whichever happens first

❑ D can be crashed more than one day …

Time – Cost Tradeoff: Example
n = slack
❑ Float (slack) of B and C are 5 days 5
❑ D can be crashed to 2 days (from original table)
❑ Hence, 5 days of slack can be taken out of D
❑ Result is 2 day duration – which happens to be
crash time for D
5 0 Reduce D by 5 days
C, 2 DC = 820 + 5(10) = $870
A, 1 7 →2 E, 2 G, 6
11 days
Start D, 2
End
B, 3 F, 3 H, 1
5 0
Time – Cost Tradeoff: Example
Both B and C have now become critical.
Reducing B without also reducing A and/or
C and D will not help.
Reducing C without also reducing B and D
will not help 0 n = slack
C, 2

A, 1 E, 2 G, 6
11 days
Start D, 2
End
B, 3 F, 3 H, 1
0
Time – Cost Tradeoff: Example

If we want to reduce project duration still

more, look for remaining activities on CP with
lowest cost slope.
Time – Cost Tradeoff: Example
Normal Crash Cost
Activity Tn Cn Tc Cc Slope
A 1 50 1 50 -- Cannot be crashed
B 3 100 2 105 5 Reducing without
crashing A and/or C and
D will not help
C 2 80 1 95 15 Reducing without
crashing B and D will not
help
D 7 150 2 200 10 Fully crashed
E 2 90 1 100 10
F 3 110 2 120 10
G 6 180 1 255 15
H 1 60 1 60 --
Time – Cost Tradeoff: Example
n = slack C, 2
2 1
A, 1 E, 1 G, 6

Start
D, 2 11
4 3 End

B, 3 H, 1 10
F, 3

Reduce E by 1 day (from 2 days to one)

E is now fully crashed
DC = 870 + 10 = $880
Time – Cost Tradeoff: Example
Next step is reduce G, which has slope 15
Reduce G by 3 days

C, 2
6 3
A, 1 E, 1 G, 3
10
D, 2
Start
3 0 End
7
B, 3 F, 3 H, 1

DC = 880 + 3(15) = $925

Time – Cost Tradeoff: Example
At this stage, every path is critical
Shortening path E-G or path F-H alone will not
shorten project; from here, must shorten both paths

C, 2

A, 1 E, 1 G, 3
7
D, 2
Start
End

B, 3 F, 3 H, 1
Time – Cost Tradeoff: Example
Normal Crash Cost
Activity Tn Cn Tc Cc Slope
A 1 50 1 50 -- Cannot be crashed
B 3 100 2 105 5 Reducing without
crashing A and/or D will
not help
C 2 80 1 95 15 Reducing without
crashing D will not help
D 7 150 2 200 10 Fully crashed
E 2 90 1 100 10 Fully crashed
F 3 110 2 120 10
G 6 180 1 255 15
H 1 60 1 60 -- Cannot crash
Time – Cost Tradeoff: Example
Reduce F and G by 1 day each

C, 2
3 2
A, 1 E, 1 G, 2
7
D, 2
Start
3 2 End

B, 3 H, 1 6
F, 2

DC = 925 + 10 + 15 = $950
Project cannot be shortened further
Time – Cost Tradeoff: Principles
Summary of principles: Determine least expensive
way to finish project by earlier date
❑ Focus on the critical path
❑ Choose least costly (lowest cost slope) alternative to
shorten project duration first
❑ If project duration has not been reduced sufficiently,
choose second-cheapest alternative, and so on
❑ Keep an eye on all non-critical paths
❑ If a non-critical path becomes critical, reduce activity
duration on this path as well in next round.
Time – Cost Tradeoff: Principles
◼ In its simplest form (as illustrated in the
example) the technique does not take account
for variability– other than variability related to
cost (it is a deterministic approach)
◼ What would the implications be if we accepted
that activity duration is actually variable? This
is taken into account in PERT and Critical
Chain methods
Time – Cost Tradeoff: Principles
◼ After crashing activities, other activities become
critical
◼ Should any activity take longer than estimated,
the whole project will be late
◼ Managers can stop the process of crashing
activities at any step to prevent further activities
from becoming critical (reduce the risk of delaying
the project)