Time – Cost Tradeoff Analysis by malj

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									(project Crashing)
   Time/cost trade-off analysis is the
    compression of the project schedule to
    achieve a more favorable outcome in terms
    of project duration, cost, and projected
    revenues
   Objectives of time/cost trade-off analysis
    ◦ Minimize total project costs
    ◦ Compress project to an acceptable duration
   Done by selectively crashing specific
    activities to shorten project duration
   You might think that total project costs
    will increase when we begin to crash
    activities
   But, total project costs consist of both
    indirect (project-based) costs (PBC) and
    activity-based costs (ABC)
    ◦ ABC goes up when we crash activities in an
      effort to finish the project early
    ◦ But, PBC (the indirect costs) goes down if we
      finish the project early
   Any activity that is on the critical path
   Activities with relatively long durations
   Bottleneck activities (that appear on
    multiple critical paths)
   Activities that relatively low cost to crash
   Activities that are not likely to cause quality
    problems if crashed
   Activities that occur relatively early in the
    schedule and are labor intensive
1.   Estimate project-based (indirect) cost per unit
     time
2.   Identify critical activities that are good
     candidates for crashing
3.   Determine activity-based (direct) cost of
     crashing selected activities vs. indirect cost
     savings
4.   Calculate crash cost per period = (crash cost –
     normal cost)/(Normal time – crash time)
5.   Select activities with minimum crash cost per
     period to be crashed
6.   Recalculate the forward pass and check for
     changes in critical path
   Reduced flexibility and less margin for error
     increased risk of failure to complete
    project on time
   Raises potential for poor quality
   Increases potential for staff burnout, stress,
    and turnover
   Raises activity-based costs
   May negatively affect other projects
   Crashing
    ◦ reducing project time by expending additional
      resources
   Crash time
    ◦ an amount of time an activity is reduced
   Crash cost
    ◦ cost of reducing activity time
   Goal
    ◦ reduce project duration at minimum cost




                                                      7
Crash
cost       Crashing activity


                     Slope = crash cost per unit time


                                     Normal Activity
Normal
cost
                                    Normal
                                    time

         Crash                                 Activity time
         time
                                                               8
   Crashing costs increase as project duration decreases
   Indirect costs increase as project duration increases
   Reduce project length as long as crashing costs are less than indirect
    costs


                      Time-Cost Tradeoff
                        Min total cost =        Total project cost
                        optimal project
                        time                            Indirect cost




                                                         Direct cost



                                                         time
                                                                             9
   The network and durations given below shows the normal
    schedule for a project.
   You can decrease (crash) the durations at an additional
    expense.
   The Table given below summarizes the time-cost
    information for the activities.
   The owner wants you to you to finish the project in 110
    days.
   Find the minimum possible cost for the project if you want
    to finish it on 110 days. (Assume that for each activity there
    is a single linear, continuous function between the crash
    duration and normal duration points).
     2       4
             12
     8
                                   7
1                                  4
12


     3             6
     4   5         4
         4




                  darla/smbs/vit       21
Activity Normal   Normal    Crash   Crash     Allowable    slope
         time     cost Rs   time    cost Rs   crash time
1        12       3000      7       5000      5            400
2        8        2000      5       3500      3            500
3        4        4000      3       7000      1            3000
4        12       50000     9       71000     3            7000
5        4        500       1       1100      3            200
6        4        500       1       1100      3            200
7        4        1500      3       22000     1            7000
                  75000             110700


                                                                   22
                  R500              R7000                       Project duration = 36
                   2                  4
                   8                 12                R700
                                                         7         From…..
     1                                                   4
    12

   R400           3                              6
                  4             5                4
                                4               R200
              R3000
                              R200

                                          R500               R7000

                                            2                  4
                                            8                 12             R700
          To…..                                                                7
                          1                                                    4
                          7
Project
                         R400               3                         6
duration = 31                                           5             4
                                            4
Additional cost =                                       4            R200
                                      R3000
R2000                                                  R200
                                                                                        23

								
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