Network Analysis (Project Management)
The main characteristics of network analysis are:-
An important aspect of project management is cost control and time management.
The main objective of project managers is to accomplish activities in shortest time without
compromising with cost and quality of work.
Network Analysis is a technique for sequencing problems related to minimize the total time
required to complete the project as well as minimizing the total project cost.
It is particularly suitable for projects not routine or repetitive type but are conducted only
once or a few times. For example, construction projects, marketing of new product, research
and development etc.
There are two forms of Network Analysis or techniques in most scheduling projects as sequencing
models:-
Programme Evaluation and Review Technique (PERT)
Critical Path Method (CPM)
Both are planning techniques and tools of management control.
History
During 1958 US Navy developed PERT while facing the task of production of Polaris Missile System
under severe time constraint. Major challenge was the timeframe and cost of the project. A research
team took up the challenge and PERT developed.
CPM on the other hand was the result of an industrial effort which was jointly initiated by DuPont
Company and Remington Rand Univac. Objective was to determine how best to reduce the time
required to perform routine plant overheads, maintenance and construction work, finally to determine
optimum trade off of the project duration and total project cost.
PERT / CPM are planning and control tools.
A project is a combination of various activities. For example, Construction of a fast food restaurant
involves activities like: - * Searching for a site * Purchasing land * Construction of building * Floor
planning for kitchen * Procurement of equipment etc.
For a banquet function also involves series of activities.
In PERT and CPM milestones are represented as events. Event or Node may be either the beginning
of an activity or its conclusions. When all activities or events are completed and connected logically
and sequentially, they form a network and form a basic record in network management. In network
records, events or nodes are denoted by numerals such as 1, 2, 3, etc and activities are denoted by
alphabets as A, B, C, etc.
Difference between PERT and CPM
Though these are planning tools meant for keeping a project on proper track, there are some basic
differences between them, like
1. PERT is event oriented, CPM is activity oriented. Event 2 occurs after event 1, or event 5
occurs after event 3 etc., whereas activity B follows activity A, or activity C follows activity
B etc.
2. In PERT network it is easy to write a network diagram, because successor and predecessor
event relationships can easily be identified.
3. PERT activities are probabilistic in nature.
4. Time required to complete a PERT activity cannot be specified accurately because of
uncertainties involved while carrying out the activity.
- 2–
5. CPM does not take into account the uncertainties in the estimation of time for an activity.
Here the time required is deterministic. Only one time is considered as activity time related to
cost. By decreasing the duration, direct cost can be increased.
6. In PERT, as there is no certainty of time, activity duration cannot be reduced, hence cost
cannot be expressed correctly.
Items PERT CPM
Devised by US Navy DuPont Company
Model Probabilistic Deterministic
Orientation Event oriented Activity oriented
Dummy activities Use of dummy activities required Use of dummy activities not
for proper sequencing required
Repetition Used for repetitive jobs Used for non-repetitive jobs
Purpose Mainly used for planning and Used for construction and business
scheduling research programmes programmes
Control Used as an important control Cannot be used as a control device
device
Since PERT network is used when the times are probabilistic, three types of time estimates are
considered like-
Optimistic time estimates: This is the shortest possible time estimates of an activity and based upon
the notion that everything will go right for the earliest completion.
Pessimistic time estimates: This is the longest possible time estimates of an activity and is based on
the premise that there are chances of interruptions in the completion of the activities.
Most likely time estimates: This has the highest probability of occurrence – as per the feeling of
Project Manager.
From these three time estimates an average is calculated.
Advantages of PERT / CPM to Management
1. PERT is the least mathematical device, very simple, has considerable practical utility in
project management. Covers phases like-
Project Planning; Time and resource estimation; Basic scheduling; Time-cost trade-offs;
Resource allocation and Project control.
2. CPM and PERT force managers to plan projects as time-event analysis cannot be without
planning.
3. PERT- excellent tool for control. CPM- an effective tool for management control. PERT cost
tradeoffs act as a means of cost control also.
4. PERT cost system- a useful tool for budgetary control.
5. PERT- an effective means of communication. PERT/CPM (Network methods) provide a clear
unambiguous way of documenting the plans and schedules, communicating the time and cost
performance of the projects to the project team and highest management.
6. PERT can be used for any size of projects. It is simple, easy to understand and can be sold to
the users.
7. PERT / CPM if properly developed can encourage team spirit and build confidence in
completing projects within the required time span.
-3 –
Limitations of PERT / CPM
1. CPM assumes that there is a certain time for the activity performance. In reality, the assumed
time interval may not be realized.
2. CPM does not offer statistical analysis in determination of estimates of time.
3. CPM is static planning model and not a dynamic controlling device.
4. PERT is not suitable for routine play or recurrent events.
5. PERT emphasizes only on time and not on costs.
6. PERT is not a complete system of cure for all devices. It forces planning, does not do
planning. It creates an environment for effective control, but cannot provide automatic
control. (Budgeting is for control of cost – a traditional device of control).
7. PERT / CPM are system oriented planning and control device. They emphasize upon the
control of time.
8. PERT / CPM is very useful in project management. It is an instrument of cost control.
Drawing a Network Diagram
Activity: denoted by arrow, resource consuming (time, money, materials etc.)
Event: denoted by a circle, rectangle or a triangle, does not consume any resource, but signifies either
start or end of an activity.
When all activities and events are connected logically and sequentially they form a network, the basic
record in Network Management.
Basic Steps
Listing: Listing out all the activities.
Arranging: They are to be arranged in sequential manner and logical order.
Estimation of time: Time is estimated and written against each activity. For example, foundation
digging, 7 day or 1 week etc.
Beginning of activities: Some activities do not have logical relationship, in such cases they can be
started simultaneously. For example, Preparation of food items and decoration of hall for organizing a
party do not have logical relationship- both can start simultaneously.
Activity addition: Activities can be added for the network depending upon their logical relationship
for completion of the project network.
Basic Rules
i) Event or Node number should be written inside the circle (or triangle/square/rectangle
etc.). Activity name to be written by capital alphabets, written above the arrow. The time
required to be written below the arrow.
A
1
- 4-
ii) There must be only one beginning and one end for network.
A A
11
6 6
B
7
B
7
K K
3 3
L
6
L
Right Wrong
iii) Activities are not to cross each other. Arcs or loops should not join activities.
Wrong
iv) Looping is to be avoided. Network arrows should move in one direction- start from the
beginning and move towards end.
Right
Wrong
- 5–
v) When two activities start at the same event and end at the same event, they should be shown as
dummy activity.
Dummy
Wrong Right
vi) When the event is written at the tail end of an arrow, it is known as tail event. When at the head
side, known as head event. There may be number of activities for head as well as tail event.
Head Event Tail event
Time estimation in PERT
1. Optimistic time (to) – Shortest possible time.
2. Pessimistic time (tp) – Longest possible duration.
3. Likely time (tl) – Some uncertainties but most of the things will go right.
4. Critical Path – Longest duration between the first and last nodes or events of a project.
Time estimation in CPM
No uncertainties are presumed, having single time estimate.
1. Earliest Start Time: Earliest occurrence time for the event from which the activity arrow
originates.
2. Earliest Finish Time: Earliest occurrence time for the event from which the activity arrow
originates plus the duration of the activity.
3. Latest Start Time: Latest occurrence time for the event at which the activity arrow terminates
minus the duration of the activity.
- 6-
4. Latest Finish Time: Latest occurrence time for the event at which the activity arrow
terminates.
5. Free Float: Free float of an activity is based on the possibility that all events occur at their
earliest times – means all activities start as early as possible.
Project Cost Analysis
Project costs are of two types – Direct and Indirect.
Direct Cost- Cost of materials, labour (salaries, wages, overtime, hiring etc.), machines and
equipments.
Indirect Cost- Cost of supervision during the implementation of the project. Salaries paid to Project
Managers / Supervisors, miscellaneous cost due to delay, rewards, incentives etc.
Crashing of a Project
This means intentionally reducing the duration by allocating more resources for it. For example,
An activity takes 10 days with 5 men. Say, same can be done in 6 days with 10 men.
So, Initial Direct Cost : 50 man days (5 men x 10 days) and Revised Direct Cost: 60 man days (10
men x 6 days).
This will be called crashing of a project. Direct cost increased by 10 man days. Due to decrease in
duration by 4 days the indirect cost decreases. So direct cost and indirect costs are inversely
proportional.
An activity can crash by adding more resources only up to a definite limit. Beyond that the duration
does not decrease since the efficiency of labour reduced.
In the above example, if the number of workers increased to 15, the same activity could be
accomplished within 5 days, but by adding 5 more men, the activity time may not decrease to that
extent.
The time beyond which the duration of the activity does not decrease by adding any amount of
resources is called the Crash Time and the corresponding direct cost is called Crash Cost.
The normal time (above example 10 days) can be defined as the duration of an activity when just
adequate resources required for its performance are deployed. Corresponding minimum direct cost is
called the Normal Cost.