1 - PERT-CPM (Part 2)

2/23/2018
NETWORK OPTIMIZATION
MODELS: PERT-CPM
PART 2
Considering Time - Cost Trade-Offs
 CPM was developed to provide the project manager with

the option of adding resources to selected activities to
reduce project completion time.
 Added resources (such as proposed by tile developers

more workers, overtime, and so on) generally increase
project costs, so the decision to reduce activity times must
take into consideration the additional cost involved.
 In effect, the project manager has to make a decision

that involves trading reduced activity time for additional
project cost.
Considering Time - Cost Trade-Offs
 Table 10.7 defines a two-machine maintenance project

consisting of five activities. Because management has
had substantial experience with similar projects, the
times for maintenance activities are considered to be
known; hence a single time estimate is given for each
activity.
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Crashing Activity Times
 Now suppose that current production levels make

completing the maintenance project within 10 days
imperative.
 By looking at the length of the critical path of the

network (12 days) we realize that meeting the
desired project completion time is impossible unless
we can shorten selected activity times.
 This shortening of activity times, which usually can be

achieved by; adding resources, is referred to as
crashing.
 However, the added resources associated with.

crashing activity times usually result in added project
costs, so we will want to identify the activities that
cost the least to crash and then crash those activities
only the amount necessary to meet the desired
project completion time
 To determine just where and how much to crash

activity times. we need information on how much each
activity can be crashed and how much the crashing
process costs.
 Hence, we must obtain for the following information:

 Activity cost under the normal or expected activity time
 Time to complete the activity under maximum crashing
(i.e., the shortest possible activity time)
 Activity cost under maximum crashing
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 Let:
 i = expected time for activity i
 i = time for activity i under maximum crashing
Mi = maximum possible reduction in time for activity
i due to crashing
 Given  i and  i, we can compute Mi:

Mi =  i -  i
 Next, let Ci denote the cost for activity i under the

normal or expected activity time and C’i denote the
cost for activity i under maximum crashing.
 Thus, per unit of time (e.g., per day), the crashing cost
K for each activity is given by
Ci  Ci
Ki 
Mi
 For example, if the normal or expected time for

activity A is 7 days at a cost of CA = $500 and the
time under maximum crashing is 4 days at a cost of C
= $800, the above equations show that the maximum
possible reduction in time for activity A is
MA = 7 – 4 = 3 days
with a crashing cost of
CA  C A 800  500 300

KA     $100 per _ day
MA 3 3
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 We make the assumption that any portion or fraction of

the activity crash time can be achieved for a
corresponding portion of the activity crashing cost.
 For example, if we decided to crash activity A by only

1½ days, the added cost would be 1½($100) = $150,
which results in a total activity cost of $500 + $150 =
$650.
 Which activities should be crashed—and by how much—

to meet the 10-day project completion deadline at
minimum cost?
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 The first reaction to this question would be to crash

the critical activities—A, B or E.
 Activity A has the lowest crashing cost per day of the

three, and crashing this activity by 2 days will reduce
the A path to the desired 10 days.
 Keep in mind, however, that as you crash the current

critical activities, other paths may become critical.
 Thus, you will need to check the critical path in the

revised network and perhaps either identify
additional activities to crash or modify your initial
crashing decision.
 For a small network, this trial-and-error approach

can be used to make crashing decisions; in larger
networks, however, a mathematical procedure is
required to determine the optimal crashing decisions.
Exercise
 Determine the least cost of reducing the project

completion date by 3 months based on the following
information:

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2/23/2018

Considering Time - Cost Trade-Offs

 CPM was developed to provide the project manager with

 Added resources (such as proposed by tile developers

 In effect, the project manager has to make a decision

Considering Time - Cost Trade-Offs

 Table 10.7 defines a two-machine maintenance project

Crashing Activity Times

 Now suppose that current production levels make

 By looking at the length of the critical path of the

Crashing Activity Times

 This shortening of activity times, which usually can be

 However, the added resources associated with.

Crashing Activity Times

 To determine just where and how much to crash

 Hence, we must obtain for the following information:

Crashing Activity Times

 Given  i and  i, we can compute Mi:

Crashing Activity Times

 Next, let Ci denote the cost for activity i under the

Crashing Activity Times

 For example, if the normal or expected time for

CA  C A 800  500 300

Crashing Activity Times

 We make the assumption that any portion or fraction of

 For example, if we decided to crash activity A by only

 Which activities should be crashed—and by how much—

Crashing Activity Times

Crashing Activity Times

Crashing Activity Times

 The first reaction to this question would be to crash

 Activity A has the lowest crashing cost per day of the

 Keep in mind, however, that as you crash the current

Crashing Activity Times

 Thus, you will need to check the critical path in the

 For a small network, this trial-and-error approach

 Determine the least cost of reducing the project

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