Project Crashing and Time-Cost Trade-Off Overview Project duration

Project Crashing and Time-Cost Trade-Off Overview Project duration

Project Crashing and Time-Cost Trade-Off Overview Project duration can be reduced by assigning more resources to project activities. However, doing this increases project cost. Decision is based on analysis of trade-off between time and cost. Project crashing is a method for shortening project duration by reducing one or more critical activities to a time less than normal activity time. Feb 6, 2020 Dr.Bokkasam Sasidhar 1 The Project Network House Building Project Data Number Activity

Predecessor Duration 1 Design house and obtain financing -- 12 months 2 Lay foundation 1 8 months 3

Order and receive materials 1 4 months 4 Build house 2,3 12 months 5 Select paint 2, 3

4 months 6 Select carper 5 4 months 7 Finish work 4, 6 4 months 2 Feb 6, 2020 Dr.Bokkasam Sasidhar

Project Crashing and Time-Cost Trade-Off Example Problem The project network for building a house Project Crashing and Time-Cost Trade-Off Example Problem Normal activity and crash data for the network Project Crashing and Time-Cost Trade-Off Example Problem Total Crash Cost $2000 $400 / week Total Crash Time 5 weeks Crash cost & crash time have a linear relationship

Dr.Bokkasam Sasidhar Time-cost relationship for crashing activity 1 Feb 6, 2020 5 Project Crashing and Time-Cost Trade-Off Example Problem Network with normal activity times and weekly crashing costs Project Crashing and Time-Cost Trade-Off Example Problem As activities are crashed, the critical path may change and several paths may become critical. Revised network with activity 1 crashed

Project Crashing and Time-Cost Trade-Off QM for Windows Output Project Crashing and Time-Cost Trade-Off QM for Windows Project Crashing and Time-Cost Trade-Off General Relationship of Time and Cost Project crashing costs and indirect costs have an inverse relationship. Crashing costs are highest when the project is shortened. Indirect costs increase as the project duration increases. The optimal project time is at the minimum point on the total cost curve. Feb 6, 2020 Dr.Bokkasam Sasidhar 10

Project Crashing and Time-Cost Trade-Off General Relationship of Time and Cost Feb 6, 2020 Dr.Bokkasam Sasidhar 11 The time-cost trade-off Example Sharon Lowe, Vice President for Marketing for the Electronic Toys Company, is about to begin a project to design an advertising campaign for a new line of toys. She wants the project completed within 47 days in time to launch the advertising campaign at the beginning of the Christmas season. Sharon has identified the six activities (labeled A, B, , F) needed to execute this project. Considering the order in which these activities need

to occur, she also has constructed the following project network. Feb 6, 2020 Dr.Bokkasam Sasidhar 12 Example (Contd.) A C E START F IN IS H B

Feb 6, 2020 F D Dr.Bokkasam Sasidhar 13 Example (Contd.) To meet the deadline of 47 days, Sharon has decided to crash the project, using the CPM method of time-cost tradeoffs to determine how to do this in the most economical way. She has gathered the data needed to apply this method, as given below. Activity A B C D

E F Feb 6, 2020 Time (days) Cost Normal Crash Normal Crash 12 23 15 27 18

6 9 18 12 21 14 4 $210,000 $410,000 $290,000 $440,000 $350,000 $160,000 $270,000 $460,000 $320,000 $500,000 $410,000

$210,000 Dr.Bokkasam Sasidhar Maximum Crash Reduction in Cost per Time day saved 3 5 3 6 4 2 $20,000 $10,000 $10,000 $10,000 $15,000

$25,000 14 Example - Solution The upper path is A-C-E-F with a path length of 51 days. Of the activities on the path, activity C has the smallest crash cost per day saved ($10,000) and activity E is next ($15,000). Activity C can only be reduced by 3 days, so activity E also will need to be crashed somewhat. Therefore, we find that the most economical way of reducing the length of this path to 47 days is to shorten activity C by 3 days and activity E by 1 day with an additional total cost of $45,000. Activity to crash Crash Cost C C C E $10,000

$10,000 $10,000 $15,000 Feb 6, 2020 Length of Path A-C-E-F 51 50 49 48 47 Dr.Bokkasam Sasidhar 15 Example - Solution The lower path is B-D with a path length of 50 days. From the time-cost trade-off data, both activities B and D have a crash

cost per day saved of $10,000, and both can be reduced by more than 3 days. Therefore, using marginal cost analysis, we find that the most economical way of reducing the length of this path to 47 days is to shorten either activity (it doesnt matter which one) by 3 days with an additional total cost of $30,000. Activity to crash B or D B or D B or D Feb 6, 2020 Crash Cost $10,000 $10,000 $10,000 Dr.Bokkasam Sasidhar Length of Path B-D

50 49 48 47 16 Example - Solution Combining both the results, the total crashing cost for the optimal way of meeting the deadline of 47 days is $30,000 + $45,000 = $75,000. Feb 6, 2020 Dr.Bokkasam Sasidhar 17

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