GMS 450 Lecture Notes - Lecture 8: Critical Path Method, Project Manager, Project A
15 Jun 2018
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GMS450
Chapter 8: Resource Allocation (5 math questions from project crashing)
Expediting a Project
• Coside a idge ostutio pojet.
• Digging the drainage ditch takes 10 days with a team of 3 workers.
• There are 3 other workers that can be added if the stop thei o task oete pouig.
• The i.e., okes a oplete diggig i das at the ost of delaig the task oete pouig
• The PM can also rent an excavator machine to get the job done in 2 days
• What is the key trade off in making the decision?
Should consider factors of adverse consequences (compare both)
For option 1) if it defects, the completion time of the project, it may affect the adverse way (can find this using slack time)
Project Crashing
Project Crashing: Shortening (or expediting) some activities within a project to reduce overall project completion time (the one on
the critical path should be crashed b/c want to shorten the time of critical path)
• Project Costs
- Direct Costs: Labor, materials, and any other costs directly related to activities (direct costs will increase if you want to
shorten the completion time of the project. i.e. hire more people, rent more equipment)
- Indirect Costs: Administration, depreciation, financial, and other overhead costs that can be avoided by reducing total
project time
- Penalty Costs: If project extends beyond some specific date (incentives)
Cost to Crash
• Normal time (NT): time necessary to complete an activity under normal conditions
• Normal cost (NC): activity cost associated with the normal time
• Crash time (CT): shortest possible time to complete an activity
• Crash cost (CC): activity cost associated with the crash
find more resources at oneclass.com
find more resources at oneclass.com
What Activities to Crash? The cheapest one (the one with least cost to crash per period)
Algorithm fo the ea, go though the ash ties oe oe / if it hages, it’ll ess up the hole uestio
• Which activities and for how long should be crashed?
• Determining the Minimum Cost Schedule
1. Determine pojet’s itial paths
2. Find the activity or activities on the critical path(s) with the lowest cost of crashing per unit of time
3. Redue the tie fo this atiit util…
a) It cannot be further reduced or
b) Until another path becomes critical, or
c) The increase in direct costs exceeds the savings that results from shortening the project
4. Repeat this procedure until the increase in direct costs is larger than the savings generated by shortening the project
Analyzing Cost – Time Trade Offs (hospital example)
• Project completion time was 69 weeks (Critical Path Analysis)
• Suppose that project indirect costs are $8000 per week
• After 65 weeks, the Regional Hospital Board imposes cost of $20k per week if the hospital is not fully operational
• Question: what is the saving per week shortening the project?
- Saving per week (up to 65 weeks = 28000)
- Saving per week (beyond week 65 = 8000)
Analyzing Cost – Time Trade Offs (Hospital example)
• Determine the minimum cost schedule for the hospital project
• Project completion time = 69 weeks
• Project cost = =$2,624,000
Direct = $1,992,000
Indirect = 69 (8000) = $552,000
Penalty = (69-65) (20,000) = $80,000
find more resources at oneclass.com
find more resources at oneclass.com
