International Operations Management
Download 340.14 Kb. View original pdf
|
final-questionnaires
| Exhibit 11.7 PERT/CPM Network for Example 3 A 4 B 3 ED 6 C 5 G H 8 I J 2 4 5 F reduced by a third week. Should the operations manager go for the bonus A PERT/CPM network for this project is shown in Exhibit There are four possible paths on this network with the following expected completion times. Path 1: ACG, expected completion time 15 weeks. Path 2: ADHJ, expected completion time 19 weeks. Path 3: BEHJ, expected completion time 20 weeks. Path 4: BFIJ, expected completion time 14 weeks The critical path is therefore made up of activities BE, Hand J and the expected duration of the project under normal circumstances is twenty weeks. To start the project crashing process, the operations manager should first determine the maximum time reduction and the crash cost per week for all the activities. The maximum time reduction is the maximum time that an activity can be reduced by and the crash cost per week is the additional cost per week resulting from reducing the duration of an activity by one week. These can be found using the following equations: Maximum time reduction normal time − crash time (11.5) Crash cost/week = Crash cost normal cost Normal time crash time (11.6) ............................................................................. ............................................................................. Elsevier US Job code KIB Chapter: Ch11-H7983 6-12-2006 9:22 p.m. Page:380 Trimsize:7.25 in in Fonts used Sabon & Frutiger Margins:Top:36 pt Gutter:66 pt Font Size pt Text Width PC Depth:43 Lines 380 International Business Application of the above equations will produce the following results: Activity Normal Time Crash Time Normal Cost ($) Crash Cost ($) Maximum Time Reduction Crash Cost/Week A 4 3 3000 3300 BC DEF G 4 3000 3650 HI J 2 800 800 The activities to be shortened must be on the critical path. This means that the operations manager should start the crashing process by concentrating on the four activities on the critical path. The activity with the lowest crash cost/week should be selected, provided that its maximum time reduction figure is not zero. Activity E has the lowest crash cost/week and a maximum time reduction of two weeks. This is therefore the activity that should be crashed first. Its normal time now becomes six weeks while its maximum time reduction figure decreases to one week. Having reduced the expected duration of the project by one week (from twenty to nineteen weeks, we have an extra cost of $250. As the bonus of exceeds this cost, the operations manager should go for the bonus. To reduce the expected duration of the project by a second week, the operations manager needs to go through the same process again. Note, however, that there are now two critical paths. The original one (BEHJ) and anew one made up of activities AD, Hand J. Two activities should then be crashed, one on each path (unless the crash cost/week figure indicates that one activity which is common in both paths would be more economical to crash. Thus, the activities to be crashed should be activity E from the original critical path and activity A from the new one. Having reduced the expected duration of the project by a second week (from twenty to eighteen weeks, we have an extra cost of $550 $250 + $300. Again, as the bonus of $600 exceeds this cost, the operations manager should go for the bonus. ............................................................................. ............................................................................. Elsevier US Job code KIB Chapter: Ch11-H7983 6-12-2006 9:22 p.m. Page:381 Trimsize:7.25 in in Fonts used Sabon & Frutiger Margins:Top:36 pt Gutter:66 pt Font Size pt Text Width PC Depth:43 Lines International Operations Management 381 Finally, to reduce the expected duration of the project by a third week, activity Ha common activity in both paths) should be chosen. This implies an additional cost of $750. This time, however, the operations manager should not go for the bonus, as a bonus of $600 for reducing the expected duration of the project to seventeen weeks would not justify the additional cost of the reduction. The operations manager should therefore use extra resources in order to reduce the project’s expected completion time from twenty to eighteen weeks and receive a total bonus of $1200. Reducing the project’s duration further to seventeen weeks would not be economical to do, as the extra cost required for this reduction would exceed the bonus. For further discussion of the concepts of project management, refer to L.V. Tavares. 24 Download 340.14 Kb. Share with your friends:
|