Topics to cover in 2 part

nd

Topics

Chapters

# of lectures

1. Project Management

2. Inventory

16

1.5

3. Decision Analysis

12

1.5

4. Queuing

13

1
(to p2)

Chapter 8 - Project Management

Chapter Topics

2
(to p3)

Project Management
Questions:
1. Why do we need to study Project
(to p4)
Management?
2. How does a project management
(to p5)
technique work?
3

Objective
The main purpose is to govern the
operations of a project such that all
activities involved are well administrated
and that we can also control its
completion time

4
(to p3)

Project management technique

Steps to solve a project management
problem:
1. to represent a project problem
(to p6)
graphically
(to p12)
2. to determine its completion time
3. to carry out sensitivity analysis, if any

(to p29)

1. Represent a project problem

graphically
Steps:
1.

Gather all information and

organize them in a table
format that consists of: event,
processing time, and
precedent constraints as
follows:

2.

Draw a semantic network to

represent them
(to p7)

Special case!

Event

Processing
Time

Precedent
constraints

A
B
C

20
30
10

-A
B

(to p9)
(to p4)

Semantic network to represent them

Here, we use three symbols:
node to represent stage
line/branch to represent event
arrow to represent precedent
constraint
Example

(to p8)
(to p6)

Example
Path

Event

Proc
Time

Pred
Const

1-2
2-3
3-4

A
B
C

20
30
10

-A
B

A
1

2
20

B
3
30

4
10

Rule1: All nodes must starts from one

Node and ends with one node

(to p7)

Special case!
Event Processing Precedent
When two or events
Time
constraints
taken places in the
same time interval
(known an concurrent A
3
-events)
B
5
A
Consider the following C
7
A
example!
(to p10)

How to draw it?

9

Case 1

A
1

C 7
Wrong!
Rule2: no node can have
two outcomes and end
with the same note
Solution

(to p11)

10

Solutions for Rule 2

A dummy activity shows
a precedence relationship
Reflects no processing time

Three ways to draw it:

B
Solution 1:

3
C

5
4

Solution 2:

What one
is better?

Dummy = 0

3
B

A
1

Dummy 2 = 0

B
C

Solution 3:

Dummy 1=0

3
C

Dummy = 0

(to p6)

11

2. Determine its completion time

Consider the project network as shown in
(to p13)
next slide
Question: Is it an easy way to find out the
solution?
(to p15)
Answer: YES, it knows as
Critical Path Method (CPM)

12

The Project Network

All Possible Paths for Obtaining a Solution

Figure8.3
Expanded network
for building a house
showing
concurrent
activities.

Table8.1
Possible Paths to
complete the
House-Building
Network

(to p14)

Then the completion time for paths A, B, C and D can be computed as

13

The Project Network

Completion time for:
path A: 12 3 4 6 7, 3 + 2 + 0 + 3 + 1 = 9 months (Critical Path)
path B: 1 2 3 4 5 6 7, 3 + 2 + 0 + 1 + 1 + 1 = 8 months

This is the
Solution!

path C: 1 2 4 6 7, 3 + 1 + 3 + 1 = 8 months
path D: 1 2 4 5 6 7, 3 + 1 + 1 + 1 + 1 = 7 months

The critical path is the longest path through the network; the minimum time the network can be completed.
Figure8.5
Alternative paths in the
network

(to p12)

14

Critical Path Method (CPM)

General concepts:
For each branch of the project network, we firstly
determine four values of ES, EF, LS and LF
For each branch, we compute their slack time,
Slack time = (LS-ES) or (LF-EF)

The critical path is located at branch that has

slack time = 0
(Do you know the reason why?)

How it works?

(to p16)

15

How CPM works?

Steps:

Branch

ES EF LS LF

1. Prepare the project

network
2. Construct a table as
follows:
(to p17)
3. Compute ES and EF
(to p22)
4. Compute LS and LF
5. Compute LS-ES or LFESij = max (EFi)
EF
(to p26)
Critical path when LS-ES=0

with

EFij = ESi + tij

EF1=0
16
(to p4)

Compute ES and EF

Note:
When computing these values, the pattern
is like moving zic-zac format by firstly
computer ES12 and then adding it to EF12
and move to next branch by copying the
max values of the branch 1-2 to say, 2-3
We compute them from top to bottom!
(to p18)
Their relationship :
(to p19)
(to p22)
Example 1:
17

The starting point of ES and EF

Consider:

Then

t12

EF1 = 0
ES12 = max (EF1)
=0

EF12 = ES12 + t12

= 0 + t12
(to p17)

18

Branches

ESij = max(EFi)

EFij=ESij+tij

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

ES12= max(EF1)=

EF12=ES12+t12=

ES23=max(EF2)=

EF23=ES23+t23=

ES24=max(EF2)=

EF24=

ES34=max(EF3)=

EF34=

ES45=max(EF4)=

EF45=

ES46=max(EF4)=

EF46=

ES56=max(EF5)=

EF56=

ES67=max(EF6)=
The overall computation is shown in next slide

EF67=
(to p20)

19

Complete solution

ES is the earliest time an activity can start.

ESij = Maximum (EFi)

- EF is the earliest start time plus the activity time.

EFij = ESij + tij

add all ti for

note 2

Add all t to note 4 and

take the longest time
Max (node 3+t34,
node2+t24)
max (5+0, 3+1)
=max(5,4)=5
Max(node4+t46,node5+t56

(note:you can compute these values and show in the network diagram as well)
(to p21)

=max(5+3,5+1)=8

20
(to p4)

The Project Network

Activity Scheduling- Earliest Times
- ES is the earliest time an activity can start.

ESij = Maximum (EFi)

- EF is the earliest start time plus the activity time.

EFij = ESij + tij

Figure8.6
Earliest activity start and finish times

(to p20)

21

Compute LS and LF
Note: We compute these values from the
bottom to top, with assigning:
LSij = LFi -tij

LFij = min LSj

with
the end of LFij = EFij

Example: computing Figure 8.3

(to p23)

22

Branches

LSij = LFij-tij

LFij=min(LSj)

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

LS12 = Li12-t12 =
LS23 = LF23-t23 =
LS24 = LF24-t24 =
LS34 = LF34-t34 =

LF12=min(LS2)=

LS45 = LF45-t45 =
LS46 = LF46-i46 =
LS56 = LF56-t56 =
LS67 = LF67-t67 =

LF45=min(LS5)=

The overall computational is shown in next slide

LF23=min(LS3)=
LF24=min(LS4)=
LF34=min(LS4)=
LF46=min(LS6)=
LF56=min(LS6)=
LF67=min(LS7)=
23
(to p24)

LS is the latest time an activity can start without delaying critical path time. LSij = LFij - tij
- LF is the latest finish time

LFij = Minimum (LSj)

Min(node3-t23,node4-t24)
=Min(5-2,5-1)=Min(3,4)=3

Min(node 6-t46,node5-t45)
=Min(8-3,7-1)
=Min(5,6)=5

Min(node 7-t67)
=Min(9-1)=8
Start with the end node first

Again, you can place these values onto the branches

Same as EF67
from the previous slide

24
(to p25)

(to p22)

The Project Network

Activity Scheduling - Latest Times
- LS is the latest time an activity can start without delaying critical path time. LSij = LFij - tij
- LF is the latest finish time

LFij = Minimum (LSj)

Figure8.7
Latest activity start and finish times

(to p24)

25

Compute LS-ES or LF-EF

Two ways you can achieve it:
1.

by compiling slack, Sij

(to p27)

2.

by showing branches

(to p28)

26
(to p16)

The Project Network

Calculating Activity Slack Time
- Slack, Sij, computed as follows: Sij = LSij - ESij or Sij = LFij - EFij
Table8.2
Activity Slack
*

Figure8.9
Activity Slack

What does it mean?

27
(to p26)

The Project Network

Activity Slack
Slack is the amount of time an activity can be delayed without delaying the project.

Slack time exists for those activities not on the critical path for which the earliest and latest star
times are not equal.
Shared slack is slack available for a sequence of activities.

Figure8.8
Earliest activity start and finish times

28
(to p26)

Sensitivity Analysis
Today, we only consider one case
Probabilistic Activity Times
Refer to activity time estimates usually can
not be made with certainty
(to p30)

PERT is known as the solution method

29

PERT
In PERT, three different time estimations are
applied:
most likely time (m),
the optimistic time (a) , and
the pessimistic time (b).
How do we make use of these three values?

(to p31)

30

Probabilistic Activity Times

We used these values to estimate the mean and variance of a beta distribution:

mean (expected time):

variance:

a 4m b
6

b-a
v

How to use these values to solve a project network problem?

(to p32)

31

PERT
We simply apply t values in CPM and determine the
values of:

ES
EF
LS
LF
S

and branches with slack = 0 still consider as critical paths

Example.

(to p33)

32

Procedures for PERT

Step 1: based on the values of a, b and m,
determine the t and v values for each path
Step 2: determine the critical path by using t
values in the CPM
Step 3: compute its corresponding means and
standard deviations according.
(to p34)

Example
Result implication
(to p39)
Applications

(to p38)

33

PERT Example
Step 1: computer t and v values
Step 2: determine the CPM
Step 3: determine v value

(to p35)

(to p36)

(to p37)

(to p33)

34

Step 1: computer t and v values

t

a 4m b
6

b-a
v

Figure8.11
Network with mean activity times and variances

Table8.3
Activity Time Estimates for
Figure 8.10

35
(to p34)

Step 2: determine the CPM

Figure8.12
Earliest and latest activity times

Table8.4
Activity Earliest and
Latest Times and Slack

36
(to p34)

Step 3: determine v value

The expected project time is the sum of the expected times of the critical path activities.
The project variance is the sum of the variances of the critical path activities.
The expected project time is assumed to be normally distributed (based on central limit
theorum).
In example, expected project time (tp) and variance (vp) interpreted as the mean () and
variance (2) of a normal distribution:
Critical Path Activity
= 25 weeks
2 = 6.9 weeks

13
35
57
7 9

Variance

total

1
1/9
16/9
4
62/9

37
(to p34)

Probability Analysis of the Project Network

- Using normal distribution, probabilities are determined by computing number of standard
deviations (Z) a value is from the mean.
- Value is used to find corresponding probability in Table A.1, App. A.

Figure8.13
Normal distribution of network duration

Critical value

38
(to p33)

Consider when
x = 30

(to p40)

x = 22

(to p41)

Tutorial Assignment

(to p42)

39

Probability Analysis of the Project Network

Example 1
2 = 6.9 = 2.63
Z = (x-)/ = (30 -25)/2.63 = 1.90
-Z value of 1.90 corresponds to probability of .4713 in Appendix A of p715. Probability
of completing project in 30 weeks or less : (.5000 + .4713) = .9713,
or 97.13% (Why so high a probability rate?)
Figure8.14
Probability the network will be
completed in 30 weeks or less

40
(to p39)

Probability Analysis of the Project Network

Example 2
Z = (22 - 25)/2.63 = -1.14
Z value of 1.14 (ignore negative) corresponds to probability of .3729 in Table A.1, appendix A.
Probability that customer will be retained is .1271 (= 0.5- 0.3729) , or 12.71%
(Again, why so low probability rate?)

Figure8.15
Probability the network
will be completed in 22
weeks or less

41
(to p39)

Tutorial Assignment
Try to use QM to solve CPM/PERT
(to p43)
problems (see slide 19)
Exercises (Chapter 8)
Old: 8, 10, 17
New: 4, 6, 11

42

Probability Analysis of the Project Network

CPM/PERT Analysis with QM for Windows

Exhibit 8.1

43

(to p16)

The Project Network

Activity Slack
Slack is the amount of time an activity can be delayed without delaying the project.

Slack time exists for those activities not on the critical path for which the earliest and latest star
times are not equal.
Shared slack is slack available for a sequence of activities.

Figure8.8
Earliest activity start and finish times

44

The Project Network

Calculating Activity Slack Time
- Slack, Sij, computed as follows: Sij = LSij - ESij or Sij = LFij - EFij
Table8.2
Activity Slack
*

Figure8.9
Activity Slack

45