A STUDY ON PROJECT EVALUATION REVIEW

TECHNIQUE AND CRITICAL PATH METHOD

CHAPTER 1

INTRODUCTION TO OPERATIONS RESEARCH:

Operations Research (also known as quantitative methods, management
science, decision etc.,) provides a quantitative technique or a scientific approach to the
executives for making better decisions for operation under their control. In other words, the
operations research provides a scientific approach to problem-solving for executive
management.
Operations Research is assuming an increasing degree of importance in theory
and practice of management. Some of the factors which are responsible for this development
are:
i.

ii.
iii.

Decision problems of modern management are so complex that only a

systematic and scientifically based analysis can yield realistic
solutions.
Availability of different types of quantitative models for solving these
complex managerial problems.
Availability of high-speed computers has made it possible both in
terms of time and cost to apply quantitative models to all real-life
problems in all types of organisations such as business, industry,
military, government, and health and so on.

Operations Research is not a fixed formula which can be applied to all types of
problems. This requires that the problems be defined, analysed and solved in a
rational, logical, systematic and scientific manner based on data, facts,
information and logic and not on intuition and subjective judgement.
Operations Research is useful only if quantitative models can be built upon,
and modified by the experience and creative insights of the decision-maker.
EVALUATION OF OPERATIONS RESEARCH:
During World War II, Britain was having very limited military resources; an
urgent need was felt to allocate the scarce resources in an effective manner to
the various military operations and to the activities within each operation.

Therefore the British and the American military management invited large
number of scientists including physicists, biologists, statisticians,
mathematicians and psychologists to apply a scientific approach to the many
strategic and tactical problems. Their efforts were instrumental in winning the
Air battle of Britain, Battle of the North Atlantic, and the Island
Campaign in the Pacific. The success of this team of scientists in Britain
encouraged United States, Canada and France to start with such teams. The
name Operations Research (O.R) came directly from the context in which it
was used and developed, viz., Research on Military Operations.

As the discipline of Operations Research developed, many names like

Operational Analysis, System Analysis, Cost Benefit Analysis,
Management Science, Decision Science, etc., were assigned to it.
After the War, the apparent success of the military team attracted the attention
of the industry, which was seeking solutions to problems caused by increasing
complexity and specialization in organizations. This resulted in complex
decision problems and the business organizations were thus prompted to use
the formal tools of Operations Research.
At the end of World War II, the scientists of this group moved to different
sectors, e.g., transportation, health, education, etc. Each of them carried with
him a conviction that the operations under the control of management can be
analysed scientifically and the optimum method for carrying out the operations
can be investigated. This resulted in categorisation of Operational Research
into different techniques and its recognition as an important subject for
decision-making.
In India Operations Research originated during the last phase of World War II.
Initially, an O.R centre was formed at the Air Headquarters to tackle problems
relating to radar. It is believed that O.R in India started in 1949 with the
opening of a unit at the Regional Research Laboratory, Hyderabad for using
Operations Research in planning and organizing Research. Ahmadabad Textile
Industry Research Association organized an O.R group for their industrial
problems.
In 1953, an O.R unit was formed at the Indian Statistical Institute, Calcutta
with a view to apply O.R techniques to national planning under the guidance
of Prof. Mahalanobis. The publication of the journal OPSEARCH by ORSI in
1964 further added to the growth of O.R activities in India.
DEFINITIONS OF OPERATIONS RESEARCH:

The September 1962 issue of the Operational Research Quarterly (London),

the journal of O.R society of U.K. carried out the following definition:
Operational Research is the application of the methods of science to complex
problems arising in the direction and management of large systems of men,
machines, materials, and money in industry, business, government and
defence. The distinctive approach is to develop a scientific model of the
system, incorporating measurements of factors such as chance and risk, with
which to predict and compare the outcomes of alternative decision strategies
and controls. The purpose is to help management, determine its policy and
actions scientifically.
James Lundy writes, O.R. is the sophisticated name given to a multi
disciplinary problem oriented approach to the top management problems. It
involves the description of the scientific methods in situations where
executives require description, prediction and comparison for the purpose of
making decisions.
Morse & Kimble define O.R. as, a scientific method of providing
executive departments with a quantitative basis for decisions regarding the
operations under their control.
Jagjit Singh states, Operations Research is a management activity
pursued in two complementary ways One half by the free and bold exercise
of commonsense untrammelled by any routine, and the other half by the free
and bold exercise of commonsense untrammelled by any routine, and the other
half by the application of a repertoire of well established pre created
methods and techniques
According to Miller and Starr, O.R. is an applied decision theory. It
uses any scientific, mathematical or logical means to attempt to cope with the
problems that confront the executive when he tries to achieve a thorough
going rationality in dealing with his decision problems.
O.R. Society of America gave the following definition of Operations
Research:
O.R. is an experimental and applied science devoted to observing understanding and
predicting the behaviour of purposeful man machine systems; and Operations Research
workers are actively engaged in applying this knowledge to practical problems in business,
government and society
Churchman, Ackoff and Arnoff have defined Operations Research in
the following manner: Operations Research is the application of scientific
methods, techniques and tools to operations of system with optimal solutions
to the problems.

CHARACTERISTICS OF OPERATIONS RESEARCH:

1. O.R. approaches problem solving and decision making from the total systems
perspective. O.R. does not experiment with the system itself but constructs a model of
the system upon which to conduct experiments.
2. O.R. is not necessarily using interdisciplinary teams, but it is interdisciplinary; it
draws on techniques from sciences such as biology, physics, chemistry, mathematics,
and economics and applies the appropriate techniques from each field to the system
being studied.
3. Model building and mathematical manipulation provide the methodology which has
been the key contribution of O.R.
4. Operation Research is for operations economy.
5. The primary focus is on decision making and computers are used extensively.
LIMITATIONS OF OPERATIONS RESEARCH:
Operations Research has certain limitations. However these limitations are
mostly related with the time and money factors involved in its applications rather than its
practical utility. These limitations are as under:
1. Magnitude of computation:
O.R tries to find out the optimal solution taking all the factors into account.
In the modern society these factors are enormous and expressing them in
quantity and establishing relationships among these requires voluminous
calculations which can only be handled by computers.
2. Absence of Quantification:
O.R. provides solution only when all the elements related to a problem can
be quantified. Intangible factors such as human relations, etc., cannot be
quantified. It may be noted that these factors, which cannot be quantified, find
no place in O.R. Also models in O.R. do not take into account qualitative
factors or emotional factors which may be quite important.
3. Conventional thinking:
O.R. is a new discipline which is quantitative in nature. There has been
resistance from the employees of Indian organisations, to the proposals
suggested by O.R. experts. Due to conventional thinking, even the executives
doubt about the utility of O.R., models towards the improvement of profits.
4. Distance between managers and Operations Research:
The application of O.R. techniques requires good knowledge of
mathematical and statistical tools. Thus, the business executives who are
entrusted with the job of implementing O.R. techniques are expected to have
this background in addition to business expertise.
5. Money and Time costs:

When the basic data are subjected to frequent changes, incorporating them
into the O.R. models is a costly affair. Moreover, a fairly good solution at
present may be more desirable than a perfect O.R. solution available after
sometime.
6. Implementation:
Implementation of decisions is a difficult and delicate task. It must take
into account the complexities of human relations and behaviour. Sometimes
resistance is offered only due to psychological factors.
NETWORK THEORY (an overview):
Most of the projects that may be handled by public sector, private sector, or
governments are usually delayed significantly due to lack of proper management, their
improper scheduling and controlling. Network analysis enables managers to cope with such
complexities involved in projects and suggests a way to overcome them. The use of Critical
Path Method (CPM) and Project Evaluation Review Technique (PERT) which are network
techniques is extremely useful for the purpose of planning, analysing, scheduling and
controlling the progress and completion of one time and repeated projects. The application of
these techniques will significantly reduce the time of their completion and will also cut down
the unnecessary costs of such projects. These techniques are quite useful for qualified
Management Consultants as well as Chartered Accountants to schedule and control their
various tasks in the areas of Income-tax, Audit, Sales-tax and Management Consultancy.
INTRODUTION TO PROJET MANAGEMENT:
A project (such as construction of a flyover, power plant, research and development
work, repair and maintenance of an airplane, marketing of a new product, etc.) may be
defined as a collection of inter-related tasks (or activities which must be completed in a
specified time according to a specified order (or sequence) and require resources such as
money, materials, manpower, facilities, space, etc. Normally for any project, one may be
interested in answering questions such as:
i.
ii.
iii.
iv.

When do we expect the project management to be completed?

If any activity is delayed, what effect will this have on the overall completion
time of the project?
If there are additional funds available to reduce the time to perform certain
activities, how should they be spent?
What is the probability of completing the project by the scheduled date?
The main objectives of project management can be described in terms of a
successful project which has been finished on time, within the budgeted cost
and to technical specifications which satisfy the end users. Planning,
scheduling and controlling the work during any worth-while project is the
main task for any project manager as explained in the following diagram:
PROJECT PLANNING
Objectives

PROJECT SCHEDULE
Resources

PROJECT CONTROL
Monitoring

 Team organisation
Project definition
Performance criteria:
Time
Cost
Requirement
of
resources
Developing a network
diagram

availability
Human
Material
Financial
Estimation
duration(s)
activities
Managerial
technique
Networks
CPM, PERT)

the
of

Revision and updating

Rescheduling
measures
or
reallocation
of
resources

NETWORK ANALYSIS:
The operations research techniques used for planning, scheduling and controlling
large and complex projects are referred to as Network Analysis or network planning and
scheduling techniques. A network is a graphical diagram consisting of a certain
configuration of arrows and nodes for showing the logical sequence of various tasks (or
activities) to be performed to achieve project objectives. Network analysis is quite useful for
designing, planning, co-ordinating, controlling and decision-making so that the project could
be economically completed in the minimum possible time with the limited available
resources. Two most popular form of this technique now used in many scheduling situations
are the Critical Path Method (or simply CPM) and the Programme Evaluation Review
Technique (or popularly known as PERT).
Critical Path Method was developed in 1957 by J.E. Kelly of Remington Rand and
M.R. Walker of DuPont to aid in the scheduling of routine plant overhaul, maintenance and
construction work. This method differentiates between planning and scheduling. Planning
refers to the determination of activities that must be accomplished and the order in which
such activities should be performed to achieve the objectives of the project. Scheduling
refers to the introduction of time into the plan thereby creating a time table for the various
activities to be performed. CPM uses two time and two cost estimates for each activity (one
time-cost estimate for the normal situation and the other estimate for the crash situation).
CPM operates on the assumption that time taken by each activity in the project is already
known precisely.
Programme Evaluation Review Technique was developed in the late 1950s by
the US Navy Special Projects office in cooperation with the management consulting firm of
Booz, Allen and Hamilton. The technique received substantial favourable publicity for its use
in the engineering and development program of the Polaris missile, a complicated project that
had 250 prime contractors and over 9,000 sub-contractors. But now this technique is very
popular in the hands of project planner and controller of various departments in government
and in industry. In PERT, we usually assume that the time to perform each activity is
uncertain and as such three time estimates (the optimistic, the pessimistic and the most likely)
are used. Indeed, in actual implementation, the distinctions between PERT and CPM have

become blurred as firms have integrated the best features of both systems into their own
efforts to manage projects effectively.
FEW MANAGEMENT APPLICATIONS OF NETWORK MODELS (PERT AND
CPM):
Critical Path Method and Programme Evaluation Review Technique has n number
of applications, some of which are listed below,
Construction of buildings, bridges, factories, highways, stadiums, Irrigation projects,
etc.
Budget and auditing procedures.
Missile development programmes.
Installation of complex new equipment such as computers or large machinery.
Advertising programmes and for development and launching of new products.
Planning of political campaigns.
Strategic and tactical military planning.
Research and development of new products.
Finding the best traffic flow patterns in a large city.
Maintenance and overhauling complicated equipment in the chemical, power plants,
and steel and petroleum industries.
Long-range planning and developing staffing plans.
Organization of big conferences, public works, etc.
Shifting of manufacturing plant from one site to another.
Preparation of bids and proposals for projects of large size.
Launching space programmes.