MODULE 3

PROJECT MANAGEMENT TECHNIQUES

Introduction to Network Analysis

Network analysis in project management means, analyzing the project

activities and planning the project accordingly. Projects are broken down to
individual tasks or activities, which are arranged in logical sequence. It is also
decided which tasks will be performed will be performed simultaneously and
sequentially.

A network diagram is constructed to represent the relationship between the

activities involved. Time, costs and other resources are allocated to different
activities economically.

The most popular network techniques are:

1. Critical Path Method (CPM)

2. Program Evaluation and Review Technique (PERT)

Applications of CPM and PERT

When more projects are handled and large number of resources are involved,
management look forward to network planning techniques like CPM, PERT etc. to
plan and control resources allocation, time and capital expenditure.

Different applications of CPM and PERT are:

1. Research and development

2. Construction projects
3. Ship building and maintenance
4. Town planning
5. Modification of existing plants for improvements
6. Manufacturing activities
7. Space programs
Scope of CPM and PERT

Scope of CPM

CPM is generally used:

1. For repetitive type projects.

2. For projects where the completion time for each activity can be
estimated accurately.
3. For projects where cost estimations can be done with fair degree of
accuracy.

Advantages of CPM

1. It helps in determining the time schedule for various activities

2. Better control over various activities for management
3. Better and detailed planning is possible
4. It defines most critical elements and thus more attention can be given to
them.

Scope of PERT

PERT is employed for non repetitive type of projects. It is employed in

projects where there is uncertainty in performance time and resource allocation.

Advantages of PERT

1. It provides clear objectives and detailed plans

2. It focuses attention on critical activities and events.
3. It provides a logical plan.
4. It provides up to date status of the project and enables a quick review.
5. It can foretell the feasibility of a plan.
6. It aids in allocating resources, time and cost.
Commonly Used Terms in CPM

Activity/Operation

A task performed in a project is called an Activity. An activity is shown by an

arrow and it begins and ends with an event. It is usually represented by alphabets
below the arrow and time to accomplish the activity is marked on the top.

Event

It is a specific instant of time which marks the start and end of an activity. It does
not consume any time or resources. It is represented by a circle with number
inside.

Pre-Operation

Pre operations are the operations which precede the operation under consideration.

Post operation

Post operations are the operations which will follow after the operation under
consideration is completed.

Concurrent operations

These operations are independent, though they start with different events they end
with same event.
Earliest Finish Time (TE)

It is the earliest possible time in which a particular operation can becompleted.

Latest Finish Time (TL)

It is the latest time by which the operation most be completed so that scheduleddate
for the completion of the project may not be delayed.

Critical Activity

Are those which if consume more than their estimated time, the project will be
delayed.

Critical Path

It is the sequence of activities which decide the total project duration. The critical
path consumes more time and resources.

Slack/Float
Slack is with reference to an event and float is with reference to an activity. Slack
is used with PERT and float is used with CPM.

Slack/float means spare time, a margin of extra time over and above its duration
which a non critical activity can consume without delaying the project.

It is the difference between latest finished time (LFT) and earliest finish time (EFT)
SLACK = TE – TL (+ve)

On critical path, slack is zero.

Dummy Activity

Dummy activity is shown by dotted arrow and it does not consume any time or
resources. It is introduced to maintain a unique numbering system for different
activities and to keep the logical sequence of activities correct.

Network Systems

Mainly 2 systems for drawing a network: (a) Activity on Arrow (AOA) system

(b) Activity on Node (AON) system

a) Activity on Arrow (AOA) system: Here, the activities are represented by an
arrow. Events are represented by circles or node at eh beginning and the end of the
arrow. Duration of activity is represented on the top of the arrow.

b) Activity on Node (AON) system: The activities are represented by circles and
arrows are used to show the dependency relationship between the activities and
nodes. The duration of the activity is represented on the top left corner of the
circle.

Network Diagram

It is a diagram which represents all the events and activities in sequence along with
their interrelationships and interdependencies.

Procedure For CPM

1. Break down the project into various activities systematically.

2. Label all activities.
3. Arrange all the activities in logical sequence.
4. Construct the network diagram
5. Number all the events and activities.
6. Find the time for each activity and mark on diagram.
7. Calculate early and late, start and finish times
8. Tabulate various times and mark EFT and LFT on the diagram.
9. Calculate total float for each activity.
10. Identify the critical activities and mark critical path on the diagram.
11. Calculate total project duration.
12. If the total project duration is to be reduced, crash the critical activities.
13. Optimize the cost and update the network diagram
Example 1
Example 2

Note:

Critical Path is the longest path.

For Earliest Finish Time (EFT) = EFT (previous) + duration, In forward direction.

For Latest Finish Time (LFT) = LFT (previous) + duration, In backward direction

Note: Take maximum value for EFT and minimum value for LFT while an event
approaching different paths

Solution
Example 3
Example 4

Solution
Example 5
Example 6
Comparison between CPM and PERT

Terms used in PERT

1. Event: It is the start or completion of a task. It is represented by a circle and

do not consume time or resources.
2. Activity: It is the actual performance of a task. It consumes time and
resources. Represented by a line and arrow.
3. Successor Event: It is the event that immediately follows another event.
4. Predecessor Event: It is an event which comes immediately before another
event.
 5. Earliest Expected Time (TE): It is the earliest expected time of the project
and equal to the sum of expected time of all the activities along the longest
path of the project.
6. Latest Allowable Time (TL): It is the largest possible time an event can take
without delaying the final completion date.
7. Slack: It is the difference between Latest Allowable Time and Earliest
Expected Time. Slack = TL-TE
8. Critical Path: This is the path in the network along which no slippage is
allowed. Slack is zero in this path.

Procedure for PERT

1. The project is broken down into different activities systematically.

2. Activities are arranged in logical sequence.
3. The network diagram is drawn. Events and activities are numbered.
4. Using three time estimates, the expected time for each activity is calculated.
5. Standard deviation and variance for each activity are computed.
6. Earliest start timings and Latest finish times are calculated and marked on
the diagram.
7. Slack is calculated.
8. Critical path is identified and length of critical path is found out.
9. Lastly, the probability that the project will finish at due date is calculated.

Estimation of Activity Time

PERT is based on the assumption that operation time cannot be estimated

accurately. To take the uncertainties in to account PERT uses three time estimates.

i) Optimistic time (to)

ii) Most likely time (tm)
iii) Pessimistic time (tp)
 i) Optimistic time (to)

It is the estimate of the minimum possible time, which an activity takes for
completion under ideal conditions. It is assumed that everything will go well.

ii) Most likely time (tm)

It is the value, which will probably be the actual time. It is assumed that
things will go in the normal way, with a few delays.

iii) Pessimistic time (tp)

It is the maximum possible time taken for the completion of an activity. This
time is based on the assumption that everything will go badly.

Expected time or Average time (te)

This is the time considered for the actual completion of the project.
(to + 4 tm + tp)
Expected Time (te) =
6

(tp – to)
Standard deviation (σ) =
6

Variance, V = σ2 = [( tp – to) / 6]2

Example 7
Example 8

(to + 4 tm + tp)
Solution : Calulate Expected Time (te) for each activity =
6
Quantitative Techniques in Management

Operations Research is a systematic and logical approach to provide a rational

footing for decision making.

Operation Research is a problem solving and decision making science.

It enhances manager’s ability to make long range plans and to solve routine
problems in running a business

Different Quantitative Techniques ( Methods of OR)

1) Linear Programming (LPP)
a) Graphical method
b) Transportation problem
i) North west corner method(NWM)
ii) Vogel’s approximation method(VAM)
c) Simplex method

2) Game theory
3) Queuing theory or waiting line
4) Dynamic programming

1) Linear Programming

Linear programming is a mathematical tool for determining the best uses

of organization’s resources.

Linear programming deals with the optimization (maximization or minimization)

of objective functions subject to various constraints (functional variables).The
objective function may be profit, cost, production capacity etc. Constraints
imposed may be due to market demand, production process and equipments,
storage capacity, raw material availability etc.
Linear programming can be used for optimization problems if the following
conditions are satisfied.

1. There must be a well defined objective function which is to be maximized or

minimized.
2. There must be some constraints to the extent of attainment of objectives.
3. There must be alternative course of actions.
4. Decision variables must be inter-related and non-negative.
5. Resources must be limited in supply.

Formulation of Linear programming problems (LPP)

The linear programming model looks like :

Maximize, z = C1x1 + C2x2 + C3x3 + ……………. + C4x4

Subject to the conditions,

a11x1 + a12x2 + a13x3 + ……………. + a1nxn < b1

a21x1 + a22x2 + a23x3 + ……………. + a2nxn < b2

………………………………………………..

………………………………………………. Upto am1

bi > 0 , i = 1, 2, 3, …. m

xj > 0 , j = 1, 2, 3, …. n

Problem
Solution:

Formulation of LP model

Step 1: The key decision to be made is how much amount of products 1, 2 ,3 are to
be manufactured inorder to maximize the profit.

Step 2: Let the extent of products 1, 2, and 3manufactured daily are x1, x2, and x3
respectively.

Step 3: In the given situation feasible alternatives are set of values of x1, x2 and x3,
where x1, x2, x3 > 0.

Step 4: Objective is to maximize the profit

i.e z = 4x1+3x2+6x3

Step 5: Express the constraints as linear equalities/ inequalities interms of

variables.

2x1+3x2+2x3 < 440

4x1+0x2+3x3 < 470 Ans

2x1+5x2+0x3 < 430

Problem
Linear Programming Problems (LPP) - Graphical Method

The steps of graphical method are:

1. Formulate the linear programming problem

2. Plot the given constraint lines considering the as equations
3. From the graph, identify the feasible solution region
4. Locate the corner points of the feasible solution region
5. Calculate the value of the objective function on the corner points
6. Choose the point where the objective function has optimal value.

Problem
Problem
Problem
Problem
Transportation Problems
Transportation method is used to solve linear programming problems.

It aims at minimizing the costs of sending goods from dispatch stations to

receiving ends.

Scope of Transportation Problems

 It provides transportation of goods to the customers at minimum cost
 Ensures most economical shipment of goods
 Maximise the profit
 Helpful when there is a large number of factories and warehouses

Commonly used methods for solving transportation problems,

1. North west corner method(NWM) 2. Least cost method

3. Vogel’s approximation method (VAM)

1. North west corner method (NWM)

It is a method to solve transportation problems.

In this method, the top left corner or north-west corner is filled first after every
allocation.

Cross the row whose supply is exhausted or column whose demand is fulfilled.

Example
Solution

Fill the N-W corner after every allocation

2.Least cost method

Fill the column having least unit cost after each allocation.

Cross the row whose supply is exhausted or column whose demand is fulfilled.

Example

Solution

Total cost = 7x10+2x70+7x40+3x40+8x8+7x20==814

3. Vogel’s approximation method (VAM)

It is a method used to find out intial solution for transportation problems.

Here the penalty for each row and column is found out which is the difference
between second smallest and smallest element corresponding to each row and
column.

Find the row/column with greatest penalty and allocate to the cell in the
corresponding row/column with least unit cost.

Cross the row whose supply is exhausted/column whose demand is fulfilled.

Continue the procedure again finding out the penalty for the remaining.

Example

Solution
Game Theory

It is used for decision making under competitive situations and is based on

Minimax principle in which each will act so as to minimize his maximum loss (or
maximize his minimum gain).

Competitive Game

A competitive situation will be a game if:

a) There is finite number of participants.

n=2 –two person game, n>2- n- person game.
b) Each player has finite number of possible courses of action.
c) Each player knows all the courses of action available to others but don’t
know which will be chosen.
d) A play is said to occur when each player chooses one of his courses of
action.
e) The gain of the participant depends upon his actions as well as others.

STRATEGY
It is the decision rule by which a player determines his courses of action.
Types of strategy
a) Pure strategy
b) Mixed strategy

a) Pure Strategy
If is a player decides to use only one particular course of action/strategy
throughout the play.

b) Mixed strategy

When the player use combination of strategies is called mixed strategy.

Two person zero sum game

A game with two persons, where a gain of one player is exactly equals the loss of
the other player.

Here each strategy results in a pay off. Total payoff of two players at he end of
each play is zero.

Pay Off
It is the outcome of playing a game (It can be gain/loss).
Pay off Matrix
It is the matrix formed by using the payoff of a player in the game.
Row designates the outcome of courses of action available to player A.
Column designates the outcome of courses of action available to player B, whose
value is actually the gain or loss of player A
Player B
1 2 3
1
20 10 22

Player A 2 30 40 38

3 15 18 25
Maximin – Minimax Principle
It can be used for the selection of optimal strategies by the two players.

Maximin Principle: Maximizes the minimum guaranteed gain of first

player (player A).
Minimax Principle = Minimizes the maximum losses.
If maximum = Minimax the corresponding pure strategies are called optimum
strategies.
If Maximin = Minimax the corresponding pure strategies are called optimum
strategies.
Saddle point
If Maximin value = Minimax value, the game has saddle point.
It is the point of intersection of two optimum strategies of a game.
Value of game

It is the expected outcome for the players when the players follow theiroptimum
strategies.
It is the value of payoff at the saddle point
Example