UT Knoxville BUAD 341 - Cost-Time Trade-offs and Project Crashing (7 pages)

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Cost-Time Trade-offs and Project Crashing



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Cost-Time Trade-offs and Project Crashing

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The rest of the notes for project scheduling and the introduction to cost-time trade-offs and project crashing.


Lecture number:
21
Pages:
7
Type:
Lecture Note
School:
University of Tennessee
Course:
Buad 341 - CBM II: Lean Operations
Edition:
1
Unformatted text preview:

BA341 21st Edition Lecture 21 Outline of Last Lecture I Precedence Table II Gantt Chart III Project Network Diagram IV Sensitivity Analysis V PERT Outline of Current Lecture VI Continuing the problem using PERT VII Cost Time Trade offs and Project Crashing VIII Time Cost Trade offs IX Reducing Project Duration X Some Time Cost Models XI Critical Path Models XII Crashing Current Lecture Using the Last Lecture we are now able to answer additional questions The probability of finishing the project in 26 days o First compute where o D the desired project completion time o TE expected completion time i e the length of the critical path sum of ETs for critical activities o CP2 variance of the critical path sum of variances of critical activities D 26 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute TE 24 and CP2 0 2 78 1 3 78 Then Z 26 24 sqrt 3 78 1 0287 1 03 Now look at the Standard Normal Cumulative Probability Table o Z 1 03 corresponds to 84 9 using a normal distribution table Now Find the project duration corresponding to 95 confidence o Start from same equation but now solve for D o According to a normal distribution table a Z of 1 65 corresponds to 95 probability o Thus D 24 1 65 sqrt 3 78 27 21 days o Cost Time Trade offs and Project Crashing Introduction Recall the project objectives o Performance scope o Cost o Time Project manager often forced to make trade offs between project objectives e g o A delayed project must be expedited in order to be completed by deadline o Resource constraints lead to changes in project scope and total duration Time Cost Trade offs We will focus next on time cost models where the goal is to find either o the most cost effective approach to reducing the duration of a project or o the project duration corresponding to minimum cost Is there a link between activity duration and activity cost o Direct costs e g overtime costs hiring costs leasing buying resource costs etc o Indirect costs e g overhead various fixed costs Reducing Project Duration Usually done by adding manpower and or resources to the project or working overtime o Note that doubling manpower does not reduce activity durations in half e g Brook s Law IBM Adding manpower to a late software project makes it even later Fast tracking o Rearrange the logic of project activities such that some critical ones can be done in parallel rather than sequentially Some Time Cost Models Goal reduce project duration by x days Constraint find the most cost effective approach Steps o 1 Determine the project inputs List of project activities and activity sequence Activity durations and costs Normal Cost NC the lowest expected activity cost Normal Time NT duration associated with NC Crash Time CT the shortest possible activity time Crash Cost CC the cost associated with CT o 2 Find the cost per period slope to expedite each activity o 3 Identify the critical path using normal activity times o 4 Start crashing reducing the activities on the critical path one activity at a time one period e g day at a time in increasing order of their slopes the lower the slope the cheaper the crashing o 5 Reevaluate the critical path after each one period crash if new duration is satisfactory stop otherwise go back to step 4 Consider the following example Project precedence table and crashing info Want to shorten project by 2 days Finding the Critical Path using normal times Find the critical path A B E Shortening the Project day 1 o Identify the critical activity that is cheapest to crash A slope 40 day B slope 60 day E slope 35 day Activity E has the lowest slope let s crash E 1 day a cost of 35 Reevaluate the critical path Shortening the project by an additional day o Identify the critical activities that are cheapest to crash A slope 40 day B slope 60 day E cannot be crashed further D slope 30 day o The cheapest alternative to further reduce project duration by 1 day is to crash A 1 day a cost of 40 In summary o The most cost effective alternative to reducing project duration by 2 days is Crash E 1 day 35 Crash A 1 day 40 Final Cost 75 o Can the project duration be further reduced Yes minimum project duration is 5 days Crash B D 1 day each at a cost of 60 30 90 o See solved problems in the text for additional examples


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