Industrial management and Engineering economy

Chapter 5
Project Management and Resource Allocation
 Introduction

 Project is a set of activities that are related to one another; and all the
activities must be completed in order to complete the project.
 Material resources and manpower resources are the two basic things
required for the completion of a project.
 Thus a project management is a specialized management technique to
plan and control the available resources under a strong single point of
responsibility for the successful completion of the project.

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 What is project ?

 Project is a unique, one-time temporary endeavor designed to

accomplish a specific set of objectives within constraints of
time and budget.
 Project is a unique set of interconnected activities,
• With definite starting and finishing points
• Undertaken by an individual or organization
• To meet specific objectives
• Within defined schedule, cost and performance parameters.

BY: Senater 3
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 Examples of projects include

Construction project

Manufacturing project Agricultural project

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 Project management

 Generally project management means planning, organizing,

and tracking a project’s tasks to accomplish the project
objectives.
 Managing projects is a matter of keeping scope, schedule,
and resources in balance.
• Scope is the range of tasks required to accomplish project goals.
• A schedule indicates the time and sequence of each task, as well as
the total project duration.
• Resources are the people and/or equipment that perform or
facilitate project tasks.
5
 Objectives of project management

 A project should be completed with in minimum of elapsed time.

 It should use available manpower and other resources as sparingly as
possible, with out delay.
 It should be completed, with minimum capital investment, with out
delay.

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 To achieve the above objectives, Project management involves the
following three phases.

1. Project Planning; In this phase, plan is made and strategies are set taking into
consideration the company's policies, procedures and rules.
2. Project Scheduling; Scheduling is the allocation of resources. The resources in
conceptual sense are time and energy; but in practical sense they encompass
time, space, equipment and effort applied to material.

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 …Cont’d

3) Project controlling; is the formal mechanism established to check

deviations from the basic plan, to determine the precise effect of
these deviations on the plan, and to re plan and reschedule to
compensate for the deviation.

Controlling is accomplished in the following well recognized steps

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 Project life cycle

 All projects have something in common.

 They are generally be sub-divided into several stages or phases to
provide better management control.
 Collectively, the project phases are called the Project Life Cycle,
which typically consists of five phases:
1. Initiating and Scoping the project
2. Planning the project
3. Executing & Launching the plan
4. Monitoring & Controlling the progress
5. Closing out the project

BY: Senater 9
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 ….Cont’d

BY: Senater 10
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 ….Cont’d

BY: Senater 11
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 ….Cont’d

 Collectively, these project phases are called the Project Life Cycle.
 Along with the project life cycle the other special project management
which form part of the project management integrative process are:
Work Breakdown Structure (WBS),
Net work scheduling consisting CPM & PERT
Resource smoothing or allocation, etc.

BY: Senater 12
A.
 1. Work Breakdown Structure (WBS)

 It is a methodology for converting a large scale project into detailed schedules for
its thousands of activities for planning, scheduling, and control purpose.
 Using a WBS, a large project may be broken down into smaller (components,
subcomponents, activities and tasks) in hierarchical structure.
 WBS facilitates resource allocation, assignment of responsibilities and
measurement and control of the project.
 The WBS is the basis for developing time and cost estimates.

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BY: Senater 14
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 Each WBS component is successively broken down into smaller
details at lower levels

 Level 1: This level contains only the final project purpose. This item should be
identifiable directly as an organizational budget item.

 Level 2: This contains the major subcomponents of the project. This subdivision is
usually identified by their contiguous location or by their related purposes.

 Level 3: Contains definable components of the level 2 subdivisions.

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 Gantt Charts

 The Gantt chart is a popular visual tool for planning and scheduling
projects.
 It enables a manager to initially schedule project activities and then to
monitor progress over time by comparing planned progress to actual
progress.
 As the project progressed, the manager able to see which activities were on
schedule and which were behind schedule.
 To prepare the chart:
• Identify the major activities
• Time estimates for each activity
• Determine the sequence of activities
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BY: Senater 17
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 2. Network Scheduling

 Network scheduling uses WBS to convert action plan into operating time
table.
 The following project management procedures are important in
network scheduling, i.e.:
Activity definition
Activity sequencing
Activity resource estimating
Activity duration estimating
Schedule development and
Schedule control.

BY: Senater 18
A.
 The project management procedures

 Activity definition: Identifying the specific activities required to produce the

project deliverables.
 Activity sequencing: Identifying and documenting the relationships between
the project activities
 Activity resource estimating: Estimating level of resources used to perform
project activities.
 Activity duration estimating: Estimating work periods that are needed to
complete individual activities.
 Schedule development: Analyzing activity sequences, activity resource
estimates, and activity duration estimates to create the project schedule.
 Schedule control: Controlling and managing changes to the project schedule.
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 …Cont’d

 Both use the same calculations, almost similar

 Main difference is deterministic & probabilistic in time estimation
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 Deterministic and probabilistic Time Estimates

 The main determinant of the way PERT and CPM networks are analyzed and
interpreted is whether activity time estimates are probabilistic or deterministic.
 If time estimates can be made with a high degree of confidence that actual times are
fairly certain, we say the estimates are deterministic.
 If actual times are subject to variation, we say the estimates are probabilistic.
• CPM is deterministic activity times.
• PERT is probabilistic activity times.

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 …Cont’d

 By using PERT or CPM, managers are able to obtain;

• A graphical display of project activities.
• Shows dependency relationships between tasks/activities in a project.
• An estimate of how long the project will take.
• An indication of which activities are the most critical to timely project
completion.

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A.
 I. Critical path method

 CPM is a network diagramming technique used to predict total project duration.

 The critical path for a project is the longest path through the network diagram and determines the
earliest time by which the project can be completed.

 CPM is:
 Single estimate of activity time

 Deterministic activity times

 CPM can be used in Production management - for the jobs of repetitive in nature where the activity
time estimates can be predicted with considerable certainty due to the existence of past experience

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 Procedures

1) Determine the activities of the project

2) Identify the predecessors and successor activities
3) Allocate resource and time for each activity
4) Draw the network diagram
5) Find the critical path
6) Determine the early start and finish times
7) Determine the latest start and finish times
8) Find the slack time for each non-critical activities

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 The Network Diagram

 Network (precedence) diagram shows the sequential relationships of activities by

use of arrows and nodes.
 There are two slightly different conventions for constructing these network
diagrams.
 AOA: the arrows represent activities and they show the sequence in which certain
activities must be performed, i.e. arrows designate activities.
 AON: the arrows show only the sequence in which certain activities must be
performed while the nodes represent the activities, i.e. nodes designate activities.

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Activity-on-arrow (AOA): The arrows in an AOA diagram represent activities
Activity-on-node (AON): The nodes in an AON diagram represent activities
BY: Senater 26
 …Cont’d

 Activities: Project steps that consume resources and/or time.

 Nodes: consume neither resources nor time. In the AOA approach, the
nodes represent the activities’ starting and finishing points.
 A path is a sequence of activities that leads from the starting node to
the ending node.

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 …Cont’d

 For example, there are three paths in this diagram.

 The sequence 1-2-4-5-6, 1-2-5-6, and 1-3-5-6 are the paths
So, how we can identify critical path?
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 …Cont’d

 The length of any path can be determined by summing the expected

times of the activities on that path.
 The longest path is referred to as the critical path, and its activities are
referred to as critical activities.
 Critical path: The longest path; determines expected project duration and
governs project completion time.
 Critical activities: Activities on the critical paths

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 …Cont’d

 Paths that are shorter than the critical path can experience some delays,
 But still not affect the overall project completion time as long as the
ultimate path time does not exceed the length of the critical path.
 The allowable slippage for any path is called slack.
 Slack: the difference between the length of a path and the length of the
critical path.
 The critical path, then, has zero slack time.

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 Rules of networking

 Each activity must have a preceding and/or a succeeding event.

 There should be no loops in the project network.
 Not more than one activity can have the same preceding and succeeding
events.
• This means that each activity is represented by a uniquely numbered arrow.
• To ensure that each activity is uniquely numbered it may be necessary some
times to introduce dummy activities.
• A dummy activity is an imaginary activity which can be accomplished in zero
time and which does not consume resources. It is represented by a dashed arrow.
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 …Cont’d

 For reference purposes, nodes are numbered typically from left to right, with lower
numbers assigned to preceding nodes and higher numbers to following nodes:

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 Example

 Consider the list of four activities for making a simple product, draw the network diagram.
 Immediate predecessors for a particular activity are the activities that, when completed, enable the start of the activity in
question

Activity Description Immediate

predecessors
A Buy Plastic Body -

B Design Component -

C Make Component B

D Assemble product A,C

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 …Cont’d

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 Example 2

 Develop the network for a project with following activities and

immediate predecessors:
 Note how the network correctly identifies D, E, and F as the immediate
predecessors for activity G.
 Dummy activities have no resources (time, labor, machinery, etc.) –
purpose is to PRESERVE LOGIC of the network

BY: Senater 35
A.
 CPM example:

 Determine the following questions;

1. The length of each path.
2. The critical path.
3. The expected length of the project.
4. The amount of slack time for each path.

BY: Senater 36
A.
 …Cont’d

Solution
1. The path lengths are 18 weeks, 20 weeks, and 14
weeks.
2. Path 1-2-5-6 is the longest path (20 weeks), so it is
the critical path.
3. The expected length of the project is equal to the
length of the critical path (i.e., 20 weeks).
4. The slack for each path by subtracting its length
from the length of the critical path.

• Hence, the critical path will be 1-2-5-6 with project duration of 20 weeks.
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 Computing forward & backward passes (ES, EF, LS & LF)

 Managers use an algorithm to develop four pieces of information about

the network activities:
Earlier start (ES), the earliest time activity can start.
Earlier finish (EF), the earliest time the activity can finish.
Latest start (LS), the latest time the activity can start and not delay the project.
Latest finish (LF), the latest time the activity can finish and not delay the
project.
 These values used to find;
a. Expected project duration.
b. Slack time.
c. The critical path.
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 Computation of earliest starting and finish times is added by two simple rules:

1. The earliest finish time for any activity is equal to its earliest start time plus its
expected duration (t).
 EF = ES + t
2. ES for activities at nodes with one entering arrow is equal to EF of the entering
arrow is equal to the largest EF of the entering arrow

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 Computation of latest starting and finish times is aided by the use of two simple
rules:

1. The latest starting time for each activity is equal to its latest finishing time
minus its expected duration (t).
 LS = LF – t

2. For nodes with one leaving arrow, LF for arrows entering that node equals the
LS of the leaving arrow.
3. For nodes with multiple leaving arrows, LF for arrows entering that node equals
the smallest LS of leaving arrows.

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 Forward passes - ES and EF
Example: Compute the ES and EF time for each activity in the diagram

 Begin by placing brackets at the two ends of

each starting activity:

 Determine and place in the brackets for each

activity the ES and EF for every
activity, and put them in brackets, as follows:

BY: Senater 41
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 …Cont’d

 Once ES is determined for each activity, EF can be found by

adding the activity time, t, to ES:
EF = ES + t
 Use an ES of 0 for all starting activities.
 Thus, activities 1-2 and 1-3 are assigned ES values of 0.
EF1-2 =0+8=8 and EF1-3 = 0+4 =4

 The EF time for an activity becomes the ES time for the next
activity to follow it in the diagram.
 Hence, because activity 1-2 has an EF time of 8, both
activities 2-4 and 2-5 have ES times of 8.
 Similarly, activity 3-5 has an ES time of 4
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 …Cont’d

BY: Senater 43
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 …Cont’d

BY: Senater 44
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 …Cont’d

 In order to determine the ES for activity 5-6, we must realize that activity 5-6 cannot
start until every activity that precedes it is finished.
 Therefore, the largest of the EF times for the three activities that precede activity 5-6
determines ES for 5-6 . Hence, the ES for activity 5-6 is 19.

BY: Senater 45
A.
 Backward passes - LS and LF

 Finding ES and EF times involves a forward pass through the network.

 But finding, LS and LF times involves a backward pass through the network.
 The LS for the last activity is obtained by subtracting its expected duration from its
LF. i.e. LS = LF – t.
 Example
 Compute the LF and LS times for the precedence diagram developed in the above
 We must add the LS and LF times to the brackets on the diagram.

BY: Senater 46
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 …Cont’d

 Begin by setting the LF time of the last activity equal to the EF of that activity.
Thus,

 Obtain the LS time for activity 5-6 by subtracting the activity time, t, from the LF
time:

 Mark these values on the diagram:

BY: Senater 47
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BY: Senater A. 48
 …Cont’d

 The LF for activity 1-2 is the smaller of the two LS times of the activities that 1-2
precedes. Hence, the LF time for activity 1-2 is 8.
 The reason you use the smaller time is that activity 1-2 must finish at a time that
permits all following activities to start no later than their LS times.

BY: Senater 49
A.
 Computing Slack Times

 There exists only one path through the network that is the longest path.
 The other paths must be either equal or shorter than that path.
 Therefore, there must exist events and activities that can be completed
before the time when they are actually needed.
 The time differential between the scheduled completion date and the
required date to meet critical path is referred to as the slack time.

 Activity slack is a measure of flexibility in the assignment of activity

start times.

BY: Senater 50
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 Compute slack times for the preceding example;

 Activities that have a slack of zero are on the critical path. Hence, the critical path is 1-
2-5-6.
BY: Senater 51
A.
 Home exercise

 A project consists of activities from A to J as shown in the following table. The

immediate predecessor and the duration in weeks of the activities are given in the
same table.
a. Draw the project network?
b. Find the critical path and the corresponding project completion time?
c. Compute slack time?

BY: Senater 52
A.
 II. Project evaluation and review technique (PERT)

Probabilistic model
Three time estimates
Consideration of success/failure probability
 PERT is based on the assumption that an activity’s duration follows a
probability distribution instead of being a single value.
 Three time estimates are required to compute the parameters of an
activity’s duration distribution:
• Optimistic time (a ) - the time the activity would take if things did go well.
• Most likely time (m ) - the consensus best estimate of the activity’s duration.
• Pessimistic time (b ) - the time the activity would take if things did not go well.
…Cont’d
 PERT Formula

 Based on the distribution of the three time estimates [Beta-

distribution], the mean or expected time (), the variance, (V) and
standard deviation, (σ) of each activity are computed as:

Since V =
 …Cont’d

 The beta distribution is approximated to standard normal distribution whose statistic is

given by the following formula.
 i.e., probability that project is completed within specified time is;

 Therefore, represent the probability that the project will be completed on or before C unit time.
This can be written by;

BY: Senater 56
A.
 Steps in PERT Analysis

1. Draw the network.

2. Find the expected time of each activity.
3. Analyze the paths through the network and find the critical path.
 The length of the critical path is the mean of the project duration probability distribution which
is assumed to be normal.

4. Determining standard deviation.

 The standard deviation of the project duration probability distribution is computed by adding the
variances of the critical activities (all of the activities that make up the critical path) and taking
the square root of that sum.

5. Probability computations can now be made using the normal distribution table.
 PERT Example

Activity Immediate Optimistic Most Likely Pessimistic

predecessor Time (W) Time (w) Time (w)
A --- 4 6 8
B ---- 1 4.5 5
C A 3 3 3
D A 4 5 6
E A 0.5 1 1.5
F B,C 3 4 5
G B,C 1 1.5 5
H E,F 5 6 7
I E,F 2 5 8
J D,H 2.5 2.75 4.5
K G,I 3 5 58 7
 …Cont’d

A. Construct the project network?

B. Find the expected duration and the variance of each activity?
C. Find critical path and the expected project completion time?
D. What is the probability of completing the project on or before 24 weeks?
E. If the probability of completing the project is 0.84, find the expected project
completion time?

BY: Senater 59
A.
A. Construct the project network?

D(5)

A(6) E(1) J(3)

H(6)

C(3)

B(4) I(5)
F(4) K(5)

G(2)

60
 B. Find the expected duration and the variance of each activity?

Activity Immediate Optimistic Most Likely Pessimistic Expected Variance (V)

predecessor Time (Hr.) Time (Hr.) Time (Hr.) Time (Hr.)
A --- 4 6 8  6  4/9
B ---- 1 4.5 5  4  4/9
C A 3 3 3  3  0
D A 4 5 6  5  1/9
E A 0.5 1 1.5  1  1/36
F B,C 3 4 5  4  1/9
G B,C 1 1.5 5  2  4/9
H E,F 5 6 7  6  1/9
I E,F 2 5 8  5  1
J D,H 2.5 2.75 4.5  3  1/9
K G,I 3 5 7  5  4/9

BY: Senater 61
A.
 C. Find the critical path and the expected project completion time?

D(5)

Critical path
A(6) E(1) J(3)
is A-C-F-I-K H(6)

C(3)

B(4) I(5)
F(4) K(5)

G(2)

• Expected time to complete the project is 23 weeks.

BY: Senater 62
A.
 Or by calculating Slack of each activity

Activities ES EF LS LF Slack
A 0 6 0 6 0*
B 0 4 5 9 5 Critical path
C 6 9 6 9 0* is A-C-F-I-K
D 6 11 15 20 9
E 6 7 12 13 6
F 9 13 9 13 0*
G 9 11 16 18 7
H 13 19 14 20 1
I 13 18 13 18 0*
J 19 22 20 23 1
K 18 23 18 23 0*
BY: Senater 63
A.
 D. What is the probability of completing the project on or before 24 weeks?

= VA + VC + VF + VI + VK = 4/9 + 0 + 1/9 + 1 + 4/9 = 2

= 1.414 and C= 24 Weeks

From the Standard Normal Distribution table:

P(z < .71) = .5 + .2612 = .7612

64
 E. If the probability of completing the project is 0.84, find the expected project
completion time?

 We also have Therefore,

Or

BY: Senater 65
A.
66
 Home exercise

BY: Senater 67
A.
 Project crashing

 Projects will sometimes have deadlines that are impossible to meet using normal
procedures.

 By using exceptional methods it may be possible to finish the project in less time than
normally required.

 However, this usually increases the cost of the project.

 Project crashing is a method for shortening project duration by reducing one or more
critical activities to a time less than normal activity time.

 BY:Crashing
Senater a project starts with using the normal time to create the critical path. 68
A.
 Notations

 = normal time to complete an activity

 = normal cost to complete an activity using normal procedures.
 = crash time to complete an activity, the shortest possible activity time
and will require additional resources.
 =crash cost (the cost to complete the activity if it is performed in it’s
shortest possible time).

BY: Senater 69
A.
 • The slope of crashing an activity is given by,

BY: Senater 70
A.
 Crash cost & crash time have a linear relationship

Total Crash Cost $2000


Total Crash Time 5 weeks
 $400 / wk

BY: Senater 71
A.
 General guidelines for project crashing

1. Draw the network diagram, find the normal critical path, identify the critical
activities and project completion time.

2. If there is only one critical path then crash the least cost activity (least slope activity)
with crash limit.
 Where crash limit is the difference b/n the current duration and the crash duration of the selected
activity.

3. If there is more critical path, select the activity on the critical path with the smallest
crash cost per period and crash this activity to the maximum extent possible or to
the point at which your desired deadline has been reached.
BY: Senater 72
A.
 Example for project Crashing with cost trade-off

Activity Immediate Normal Normal Cost Crash Time Crash Cost

predecessor Time (W) ($) (W) ($)
1-2 - 13 700 9 900
1-3 - 5 400 4 460
1-4 - 7 600 4 810
2-5 1-2,3-2 12 800 11 865
3-2 1-3 6 900 4 1130
3-4 1-3 5 1000 3 1180
4-5 1-4,3-4 9 1500 6 1800

BY: Senater 73
A.
 Iteration 1: the CPM calculations are shown in figure

 The normal project completion time = 25

weeks
 Critical path = 1-2-5
 The total cost (normal cost) = 5900$
 Indirect cost = 25*160 = 4000$
 Total cost = 5900+4000 = 9900$

BY: Senater 74
A.
• The details of crash limit and slope of each of the critical activities are summarized
in the following Table.

Critical Crash limit Cost slope ($)

activity (Weeks)
1-2 4
2-5 1 65

BY: Senater 75
A.
 The critical activity with minimum cost slope is 1-2.
 Hence crash the duration of the activity 1-2 by one week from week 13 to week 12 as
shown.

Iteration 2: we have;
 The total cost = Previous total cost +increase in direct cost –
decrease in indirect cost
= 9900+50-160
= 9790$
 Since the cost of this iteration is less than previous cost,
proceed further

BY: Senater 76
A.
• The critical path is not changed. The details of crash limit and slope of each of the
critical activities are summarized in the following Table.

Critical Crash limit Cost slope ($)

activity (Weeks)
1-2 3
2-5 1 65

BY: Senater 77
A.
 The critical activity with minimum cost slope is 1-2.
 Hence crash the duration of the activity 1-2 by one week from week 12 to week 11
as shown.

Iteration 3: we have;
 The total cost = Previous total cost +increase in direct
cost – decrease in indirect cost
= 9790 +50-160
= 9680$
 Since the cost of this iteration is less than previous
cost, proceed further

BY: Senater 78
A.
• Now there are two critical paths1-2-5 and 1-3-2-5. The details of crash limit and
slope of each of the critical activities are summarized in the following Table.

Critical Crash limit Cost slope

Critical paths
activity (Weeks) ($)
1-2 2 50
1-2-5
2-5 1 65
1-3 1 60
1-3-2-5 3-2 2 115
2-5 1 65

BY: Senater 79
A.
 The critical activity 1-2 has the least slope of 50.
 If this is to be crashed the critical activity 1-3 which has the least slope among the critical activity
(parallel to the part of the critical path 1-2) should also be crashed simultaneously.
 The total cost of crashing these two critical activities by one week is 110(50+60)

• Contrary to this alternatives, one can consider the activity

2-5 which is common to both the critical paths.
• Because crashing of this activity by one week will cost
65$.
• Hence crash the duration of the activity 2-5 by one week
from week 11 to week 10 as shown.

BY: Senater 80
A.
 The critical activity with minimum cost slope is 2-5.
 Hence crash the duration of the activity 2-5 by one week from week 11 to week 10
as shown.
Iteration 4: we have;
 The total cost = Previous total cost +increase in direct
cost – decrease in indirect cost
= 9680 +65-160
= 9585$
 Since the cost of this iteration is less than previous
cost, proceed further

BY: Senater 81
A.
• Now there are two critical paths1-2-5 and 1-3-2-5. The details of crash limit and
slope of each of the critical activities are summarized in the following Table.

Critical Crash limit Cost slope

Critical paths
activity (Weeks) ($)
1-2 2
1-2-5
2-5 0 -
1-3 1
1-3-2-5 3-2 2 115
2-5 0 -

BY: Senater 82
A.
 The critical activity 1-2 has the least slope of 50.
 If this is to be crashed the critical activity 1-3 which has the least slope among the critical
activity (parallel to the part of the critical path 1-2) should also be crashed simultaneously.
 Hence the activities 1-2 and 1-3 are crashed simultaneously by one week as shown.

Iteration 5: we have;
 The total cost = Previous total cost +increase in direct
cost – decrease in indirect cost
= 9585 +50+60-160
= 9535$
 Since the cost of this iteration is less than previous
cost, proceed further
BY: Senater 83
A.
• Now there are two critical paths1-2-5 and 1-3-2-5. The details of crash limit and
slope of each of the critical activities are summarized in the following Table.

Critical Crash limit Cost slope

Critical paths
activity (Weeks) ($)
1-2 2
1-2-5
2-5 0 -
1-3 0 -
1-3-2-5 3-2 2
2-5 0 -

BY: Senater 84
A.
 The critical activity 1-2 has the least slope of 50.
 If this is to be crashed the critical activity 3-2 which has the least slope among the critical
activity (parallel to the part of the critical path 1-2) should also be crashed simultaneously.
 Hence the activities 1-2 and 3-2 are crashed simultaneously by one week as shown.

Iteration 6: we have;
 The total cost = Previous total cost +increase in direct
cost – decrease in indirect cost
= 9535 +50+115-160
= 9540$
 Since the cost of this iteration is more than previous
cost, stop the procedure and treat the previous
solution as optimum project crash.
BY: Senater 85
A.
 Home exercise

 Find the crashed duration of the project with optimum total cost for
the following given information.

BY: Senater 86
A.