PERT and CPM, Resource Allocation, GERT MT 246 Module 11

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PERT and CPM, Resource Allocation, GERTMT 246 -
Module 11
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Topics Covered Previously

• Schedule Parameters
• Critical Path
• Early Expected Time
• Latest Allowable Time
• Total Slack
• Free Slack
• Time Based Networks

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Criticisms of Network Methods

• Unrealistic Results
• Assume Project can be completely defined (not
  true) they evolve
• No Clean line between activities (precedence
  helps)
• Precedence relationships are not fixed (do-loop
  may be necessary, I.e., test)
• They do produce the best schedule possible

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Alternative Schedule Networks

• Program Evaluation and Review Technique (PERT)
• Incorporates uncertainty into schedule estimates
• Critical Path Method (CPM)
• Explicitly includes cost as a scheduling
  consideration
• Graphical Evaluation and Review Technique

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Program Evaluation and Review Technique (PERT)

• Utilizes three time estimates for each activity
• Optimistic, a
• Most Likely, m
• Pessimistic, b
• Beta Probability Distribution Function for Each
  Activity
• Calculates Expected Time, t
• Calculates Variance, V

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Estimating Activity Time
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Probability of Finishing by A Target Completion
Date

• Expected duration of project T is the sum of
  expected Activity times on Critical Path
• Variation in the Project Duration Distribution is
  the sum of the variations of the activity
  durations on the Critical Path

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Pert Network with Expected Activity Times and
Variances
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PERT Advantages/Disadvantages

• Allows sensitivity analysis to determine
  probability of finishing the project on time
• Does not account for Near Critical Path
• Extremely complicated
• Cannot account for errors in schedule logic or
  the ability of project manager to alter schedule
  logic via workarounds
• Bottom Line No better than MS Project and a lot
  more complicated!

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Z Values for the Normal Distribution
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Near-Critical Paths

• PERT is overly Optimistic
• Paths near the Critical Path with Large Variance
  may become critical
• Probability of Completing All Paths is the
  Product of Probability on each Path

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Meeting the Target Date

• Actions to Shorten to Project
• Move Activity on the Critical Path to a Parallel
  Path
• Add or transfer resources,from activities with
  large slack to critical or near-critical
  activities
• Substitute less time-consuming activities or
  delete those that are not of utmost importance

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Criticisms of Target Date Actions

• Paralleling Activities can be risky, failure of
  one can hurt the other
• Adding or transferring resources to speed
  activities increases cost and denies resource
  leveling
• Substitution or Elimination can degrade end-item
  Performance, Requirements, Poor Quality of Work

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Simulation of PERT Network

• Uses Monte Carl Methods to show the Near-Critical
  Path Sensitivity
• Procedure gives an Average Project Duration and
  Standard Deviation (Variance) which is more
  realistic than simple PERT
• Returns Probabilities ff Other Paths Becoming
  Critical
• Allows Historical Data

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Activities and Time Estimates from Evans and Olson
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Project Network from Evans and Olson
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Crystal Ball Simulation Results
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Criticisms of PERT

• Assumes Activity times can be Accurately
  Estimated and are Independent
• Three estimates are guesses, not necessarily
  better than one guess
• Contractual Arrangements Influence Time Estimates
• Activity Times are not Independent ( Constant
  Energy Surface)
• Conflict of necessary Resources

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Criticisms of PERT (Continued)

• Leads to Overly Optimistic Results
• Looking only at Critical Path Misleading
• Near-Critical Paths must be Considered
• The Beta Distribution Gives Large Errors in
  Estimating T
• Errors in T come from faulty time estimates

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Critical Path Method (CPM)

• DuPont Company (1957), a Plant Construction
  Project
• Gives Primary Emphasis to Cost
• Deterministic
• Only One Time Estimate is Used
• Mathematical Procedure for Trade-off between
• Project Duration
• Project Cost
• Analysis of resources
• Trades between Activities to Minimize Duration
  and Cost

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Time-Cost Relationship

• Assumes that the estimated completion time for an
  activity can be shortened by adding resources
• All activities are assumed to be performed at the
  normal work pace
• Normal Cost is associated with Normal Work
  Pace
• Normal work pace is the most efficient and
  therefore least costly
• Faster than normal work pace adds cost

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Time/Cost Relationship of an Activity
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Reducing Project Duration

• CPM model can be utilized to shorten the project
  completion time
• Allows tradeoff of penalty of schedule slip vs.
  cost of adding resources
• Time/Cost relationship allows determination of
  the cost of shortening a given activity
• Reducing an activity increased its cost
• Can be made anywhere on the critical path
• Minimized by selecting the activity with the
  smallest slope

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CPM Time-cost Tradeoff
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Reducing Project Duration (Continued)

• Step 1
• Reduce A by one week to 21 weeks adds 2K to the
  Project Cost
• Does not change CP
• Step 2
• Reduce A by one more week to 20 weeks adds 2K for
  a total of 59K
• Slack in Path B-E us used
• Two CPs

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Reducing Project Completion Time
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Reducing Project Duration (Continued)

• Step 3
• Reduce A and E by one week to 19 weeks adds 4K to
  the Project Cost 63K
• Reduces A to 6 Weeks (crash)
• Step 4
• Slack time on C-F is 3 weeks
• Reduce G by 3 weeks( one week beyond crash) to
  16weeks adds 15K for a total of 59K
• Slack in Path C-F us used
• All Paths become CPs

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Reducing Project Completion Time
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Reducing Project Duration (Continued)

• Step 5
• Must shorten all three CPs
• 1 Week from E, D, and C
• Project is 15 weeks
• Project cost is 86K
• C is at Crash

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Duration Reduction and Associated Cost Increase
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Shortest Project Duration

• Performed Step-by-Step the activities to speed up
  to reduce the Project Completion Time
• Eventually leads to the shortest possible Project
  Duration and Cost
• Shortest Possible Project Duration Crash all
  Activities at Once
• Fig 8-8 Duration 15 wks cost 104K
• Not necessary to Crash every Activity to achieve
  shortest Time

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Example Network Using Crash Times
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Shortest Project Duration (Continued)

• 15 Weeks is time on CP
• Stretch time along non CP
• Path B-E-G has 5 weeks slack
• Three weeks added to B
• Two Weeks to E
• One week to D
• 104K - 3(3K) -2(2K) - 1(5K) 86K
• Crash all, then stretch NC activities with
  greatest slope, use all slack to obtain minimum
  cost

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Total Project Cost

• Add Indirect to Activity Costs to Obtain TPC
• Assume an Indirect Formula
• Overlay the Indirect and Direct to Obtain the
  Total Project Cost
• Consider Contractual Incentives
• Penalty
• Bonus

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Total Time-Cost Tradeoff
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Time-Cost Incentives
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CPM Advantages/Disadvantages

• Does not deal with influence of indirect costs
  and contractual incentives
• Dealing with these parameters increases schedule
  complexity
• Assumes that time and cost are linearly related
• Plausible but unproven in practice
• Overridden by Uh-Ohs!
• Cannot account for errors in schedule logic or
  the ability of project manager to alter schedule
  logic via workarounds

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CPM Advantages/Disadvantages (Continued)

• Bottom Line No better than MS Project and a lot
  more complicated!

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Microsoft Project

• Will be used for Estimating and Scheduling home
  work assignment due in late April
• value is 100/250 points for Homework Grade
• If your CD, which was included with your
  Textbook, license has expired
• Recommend Ordering 60 day Trial CD from Microsoft

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MS Project Re-Order

• Ordered 10 Trial CDs for Class Use
• Or You MayPoint Web Browser to MS Project Home
  Page and Order your own Copy
• http//www.microsoft.com/products/msoffice/project
  /
• Click on Order Trial CD radio button
• Follow instructions
• 10 Day delivery
• You Pay SH about 6.00

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MS Project Near Term Assignment

• Install software from Trial CD, if not available
• CD is available for lt6.00
• Go over tutorials
• Try some of the homework examples
• Change dependencies to see the effect
• Do homework on MS Project
• Not required
• Will help on later assignments

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Scheduling with Resource Constraints

• Constrained Resource Related Problems Involve
• Labor
• Capital
• Equipment
• Material
• Consider two Resource Relate Problems
• Resources are Balanced
• Resources are Available

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Resource Loading and Leveling

• Resource Loading
• Quantity/Amount necessary to conduct Project
• Changes throughout the Project
• Usually low the peak then low
• Problem for Functional Manager
• Solution is Resource Leveling
• Juggle activities
• Delay or Split Activities to Achieve Smoothing

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LOGON Project Weekly Labor Requirements
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Worker Loading for the LOGON Project
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Resource Loading and LevelingContinued

• More Uniform Loading if Activity could be Split
• Once defined as Activity this can be a problem
• Changes
• Budgets
• Costs accounting Structures
• Schedules
• Other Control Mechanisms
• Most SW Packages and PDM Permit Splitting

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Smoothed Worker Loading for the LOGON Project
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Resource Loading and Leveling Continued

• Leveling Easily Applied to Any Single Resource
• Difficult with Many Resources
• Impossible to Level Requirements for all
  Resources
• Minimize Conflicts
• Smooth loading for Priority Resources
• Human Resources are Given the Highest Priority

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Equipment Loading for the LOGON Project
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Resource Loading and Leveling Continued

• The Four Options Are
• Delaying Activities
• Eliminate Some Work Segments or Activities
• Substitute Less Resource-Consuming Activities
• Substitute Resources
• Cons
• Most Qualified Workers not Available
• Reduces Scope/Quality of Work-Project Performance

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Constrained Resources

• Activities Cannot Consume all Working Capital or
  Pieces of Equipment
• Differs from Resource Leveling in that more
  attention is given to Maximum Availability
• Sometime Rescheduling or Delay is required until
  Resources are Available

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Schedule and Worker Loading with a 14 Worker
Constraint
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Constrained Resources (Continued)

• Constrained Resources forces scheduling
  activities for immediate or delayed until assets
  are available
• PM Scheduling SW Employ a Heuristics (Procedure
  Based on a Rule) for making the Decision
• ASAP
• ALAP
• Most Resources
• Shortest Task Time
• Least Slack

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Constrained Resources (Continued)

• No single Rule works (always) better than another
• Use Variety in Combination to Obtain best
  Schedule
• Available Scheduling SW use only One or Two
  Methods (You can do better by trial and
  replace)I.e.,
• Reduce the level of resources per Activity
• Split the Activities
• Alter the Network

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Multiple Project Scheduling

• Multiple, Concurrent Projects from a Matrix Pool
  of Equipment and Skilled Workers
• Construction
• Consulting
• Systems Development
• Maintenance
• Maintain a minimum, Uniform Level Personnel and
  Other Resources (Smoothing)

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Graphical Evaluation and Review Technique (GERT)

• Similar to PERT in Many Ways
• Allows Alternative Time Distributions
• Allows Looping Back of Activities
• If a test is failed, can be rescheduled
• New Symbols to Represent a large Variety of
  Situations
• Complex Nodes, Activities into and Paths from
• Probabilistic
• Branching

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Graphical Evaluation and Review Technique (GERT)

• ROSEBUD Project Expanded to include failure of
  the Tests
• Hardware Test means Adjustments to Equipment
• System Test means change any or all of
• Installation
• Redesign of Hardware
• Re-spec SW
• User Test
• Major of Minor System Adjustments
• System Test

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ROSEBUD Expanded Network
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GERT Network for ROSEBUD Project
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Next Lecture

• Cost Estimating and Budgeting
• A billion here and a billion there. Pretty soon
  it starts to add up to real money. Senator J.
  Everett Dirkson, Democrat from Illinois

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Diagramming and PERT, CPM Homework Assignment

• Homework Assignment Worth 50 Points
• Nicholas Ch 7, Questions Ch7-10a, 11a, 13b, 15a
  and c, 19
• Nicholas Ch 8, Questions Ch8-10, 11, 14
• Due on March 27, 2001