90 par t 1 | I n t r o d uc t i o n t o O p erat i ons Manage m ent

CPM is a technique in which each activity has a normal or standard time that we use
in our computations. Associated with this normal time is the normal cost of the activity.
However, another time in project management is the crash time, which is defined as the
shortest duration required to complete an activity. Associated with this crash time is the
crash cost of the activity. Usually, we can shorten an activity by adding extra resources
(e.g., equipment, people) to it. Hence, it is logical for the crash cost of an activity to be
higher than its normal cost.
The amount by which an activity can be shortened (i.e., the difference between its
normal time and crash time) depends on the activity in question. We may not be able to
shorten some activities at all. For example, if a casting needs to be heat-treated in the
furnace for 48 hours, adding more resources does not help shorten the time. In contrast,
we may be able to shorten some activities significantly (e.g., frame a house in 3 days
instead of 10 days by using three times as many workers).
Likewise, the cost of crashing (or shortening) an activity depends on the nature of
the activity. Managers are usually interested in speeding up a project at the least addi-
tional cost. Hence, when choosing which activities to crash, and by how much, we need
to ensure the following:
◆ The amount by which an activity is crashed is, in fact, permissible
◆ Taken together, the shortened activity durations will enable us to finish the project
by the due date
◆ The total cost of crashing is as small as possible
LO 3.6 Crash a project Crashing a project involves four steps:
Step 1: Compute the crash cost per week (or other time period) for each activity in
the network. If crash costs are linear over time, the following formula can be
used:

(Crash cost - Normal cost)

Crash cost per period = (3-11)
(Normal time - Crash time)

Step 2: Using the current activity times, find the critical path(s) in the project net-
work. Identify the critical activities.

Step 3: If there is only one critical path, then select the activity on this critical path
that (a) can still be crashed and (b) has the smallest crash cost per period.
Crash this ­activity by one period.
If there is more than one critical path, then select one activity from each
critical path such that (a) each selected activity can still be crashed and (b) the
total crash cost per period of all selected activities is the smallest. Crash each
activity by one period. Note that the same activity may be common to more
than one critical path.
Step 4: Update all activity times. If the desired due date has been reached, stop. If
not, return to Step 2.

We illustrate project crashing in Example 12.

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Example 12 PROJECT CRASHING TO MEET A DEADLINE AT MILWAUKEE PAPER

Suppose the plant manager at Milwaukee Paper Manufacturing has been given only 13 weeks
(instead of 16 weeks) to install the new pollution control equipment. As you recall, the length of
Julie Ann Williams’s critical path was 15 weeks, but she must now complete the project in 13 weeks.
APPROACH c Williams needs to determine which activities to crash, and by how much,
to meet this 13-week due date. Naturally, Williams is interested in speeding up the project by
2 weeks, at the least additional cost.
SOLUTION c The company’s normal and crash times, and normal and crash costs, are shown
in Table 3.5. Note, for example, that activity B’s normal time is 3 weeks (the estimate used in
computing the critical path), and its crash time is 1 week. This means that activity B can be
shortened by up to 2 weeks if extra resources are provided. The cost of these additional resources
is $4,000 (= difference between the crash cost of $34,000 and the normal cost of $30,000). If we
assume that the crashing cost is linear over time (i.e., the cost is the same each week), activity B’s
crash cost per week is $2,000 (= $4,000/2).

TABLE 3.5 Normal and Crash Data for Milwaukee Paper Manufacturing

TIME (WEEKS) COST ($)

CRASH COST PER CRITICAL
ACTIVITY NORMAL CRASH NORMAL CRASH WEEK ($) PATH?
A 2 1 22,000 22,750 750 Yes
B 3 1 30,000 34,000 2,000 No
C 2 1 26,000 27,000 1,000 Yes
D 4 3 48,000 49,000 1,000 No
E 4 2 56,000 58,000 1,000 Yes
F 3 2 30,000 30,500 500 No
G 5 2 80,000 84,500 1,500 Yes
H 2 1 16,000 19,000 3,000 Yes

This calculation for Activity B is shown in Figure 3.15. Crash costs for all other activities can
be computed in a similar fashion.
Steps 2, 3, and 4 can now be applied to reduce Milwaukee Paper’s project completion time at
a minimum cost. We show the project network for Milwaukee Paper again in Figure 3.16.
The current critical path (using normal times) is Start–A–C–E–G–H, in which Start is just a
dummy starting activity. Of these critical activities, activity A has the lowest crash cost per week
of $750. Julie Ann Williams should therefore crash activity A by 1 week to reduce the project
completion time to 14 weeks. The cost is an additional $750. Note that activity A cannot be
crashed any further, since it has reached its crash limit of 1 week.
At this stage, the original path Start–A–C–E–G–H remains critical with a completion time
of 14 weeks. However, a new path Start–B–D–G–H is also critical now, with a completion
time of 14 weeks. Hence, any further crashing must be done to both critical paths.
On each of these critical paths, we need to identify one activity that can still be crashed.
We also want the total cost of crashing an activity on each path to be the smallest. We might be
tempted to simply pick the activities with the smallest crash cost per period in each path. If we
did this, we would select activity C from the first path and activity D from the second path.
The total crash cost would then be $2,000 (= $1,000 + $1,000).

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Figure 3.15
Crash and Normal Times and
Costs for Activity B

Figure 3.16
Critical Path and Slack Times
for Milwaukee Paper

But we spot that activity G is common to both paths. That is, by crashing activity G, we
will simultaneously reduce the completion time of both paths. Even though the $1,500 crash
cost for activity G is higher than that for activities C and D, we would still prefer crashing G
because the total crashing cost will now be only $1,500 (compared with the $2,000 if we crash
C and D).

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 CHap t Er 3 | p roject ManageMe nt 93

INSIGHT c To crash the project down to 13 weeks, Williams should crash activity A by 1 week
and activity G by 1 week. The total additional cost will be $2,250 (= $750 + $1,500). This is impor-
tant because many contracts for projects include bonuses or penalties for early or late finishes.
LEARNING EXERCISE c Say the crash cost for activity B is $31,000 instead of $34,000. How
does this change the answer? [Answer: no change.]
RELATED PROBLEMS c 3.22–3.26

A Critique of PERT and CPM

As a critique of our discussions of PERT, here are some of its features about which
operations managers need to be aware:
Advantages
1. Especially useful when scheduling and controlling large projects.
2. Straightforward concept and not mathematically complex.
3. Graphical networks help highlight relationships among project activities.
4. Critical path and slack time analyses help pinpoint activities that need to be closely
watched.
5. Project documentation and graphs point out who is responsible for various
activities.
6. Applicable to a wide variety of projects.
7. Useful in monitoring not only schedules but costs as well.

Limitations
1. Project activities have to be clearly defined, independent, and stable in their
relationships.
2. Precedence relationships must be specified and networked together.
3. Time estimates tend to be subjective and are subject to fudging by managers who
fear the dangers of being overly optimistic or not pessimistic enough.
4. There is the inherent danger of placing too much emphasis on the longest, or
critical, path. Near-critical paths need to be monitored closely as well.

Using Microsoft Project to Manage Projects

The approaches discussed so far are effective for managing small projects. However, for
large or complex projects, specialized project management software is much preferred.
In this section, we provide a brief introduction to the most popular example of such
specialized software, Microsoft Project. A time-limited version of Microsoft Project
may be requested with this text.

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OM in Action IOC Butadiene Extraction Project

The butadiene extraction unit of Indian Oil Corporation Limited in
Panipat, Haryana, is a landmark project that marks the venture of com-

Marc Pagani Photography/Shutterstock

pany into the production of synthetic, commercial rubber. In this project
the company faced few challenges like there was a frequent modifi-
cation in scope with new requirements like additional pumps, piping
systems, and equipment required, had a minimum delivery period of
10–12 months. The company also faced issues in design and construc-
tion of pipes due to lack of experience in construction and operation of
a butadiene plant. Butadiene leakage leads to serious health hazards.
Therefore, utmost care and necessary safety steps were required to be
implemented ensuring that no pockets were formed which could lead review meetings with site and construction contractors, suppliers, and
to leakage. After close to two years into the project, a strategic decision vendors to monitor and control progress. The company managed to con-
was made to facilitate direct merchant sale of butadiene, leading to duct training for existing IOCL engineers by Butadiene experts, who also
ambiguities on intermediate storage arrangements and its transfer to had helped to carry out hazard and safety operations by installing a spe-
the Synthetic Butadiene Rubber (SBR) plant in Panipat. Handling mul- cial chemical cleaning procedure and an innovative technique to ensure
tiple contractors, suppliers, and stakeholders of different background leak proof operations. Instead of purchasing all the required equipment,
and culture working in different time zones and areas was another the team camped at the project site for 20 days and re-engineered pro-
challenge faced in effective project management. cesses. The project was completed with no rework, or cost and time over-
The company also adopted approaches like Identification of critical runs, and adhered to quality assurances plans and standards. Mr. Narinder
milestones, estimates from feasibility studies, time-bound closures, maxi- Kumar, executive director (project), IOCL, states, “The butadiene extraction
mum use of existing facilities, and reusable assets. Project management unit project has set high standards in project management. It is a matter
tools like Oracle Primavera was extensively used to schedule, monitor, and of honor forus that the project has won PMI India Best Project of the Year
control the project. IOCL ensured a close co-ordination among the teams, award under the medium sized projects category.”
back calculated the completion time of activities, used to put in additional Adapted from Sapna Gupta, ‘Winning Projects of 2014’, [Link]
resources when required and also prepared catch up plans. Regular brain- [Link]/manageindia/volume5/issue11/[Link] , as accessed
storming sessions, audits, shop floor visits, and monthly, weekly, and daily on February 2, 2017 at 4.17pm

Milwaukee Paper Co. Microsoft Project is extremely useful in drawing project networks, identifying the
Activities project schedule, and managing project costs and other resources.
TIME PREDE­
ACTIVITY (WKS) CESSORS
Entering Data Let us again consider the Milwaukee Paper Manufacturing project.
Recall that this project has eight activities (repeated in the margin). The first step is to
A 2 —
define the activities and their precedence relationships. To do so, we select File|New to
B 3 —
open a blank project. We type the project start date (as July 1), then enter all activity
C 2 A information (see Program 3.1). For each activity (or task, as Microsoft Project calls it),
D 4 A, B we fill in the name and duration. The description of the activity is also placed in the
E 4 C Task Name column in Program 3.1. As we enter activities and durations, the software
F 3 C automatically inserts start and finish dates.
The next step is to define precedence relationships between these activities. To do so,
G 5 D, E
we enter the relevant activity numbers (e.g., 1, 2) in the Predecessors column.
H 2 F, G
Viewing the Project Schedule When all links have been defined, the com-
plete project schedule can be viewed as a Gantt chart. We can also select View|Network
Diagram to view the schedule as a project network (shown in Program 3.2). The criti-
cal path is shown in red on the screen in the network diagram. We can click on any of

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