CRITICAL PATH METHOD

(CPM)
&
NETWORK COST
ANALYSIS

SUBMITTED BY- GROUP 8

UPASNA HANDA
ANUUBHAV NANDA
PRADEEP CHAUHAN
KUBAIR TICKOO (0 Pages)

Contents
CRITICAL PATH METHOD (CPM).............................................................................. 3
THE ORIGINS OF CPM............................................................................................. 3
THE ASSUMPTIONS OF CPM................................................................................... 3
CPM BENEFITS....................................................................................................... 4
STEPS IN CPM PROJECT PLANNING.........................................................................8
1. Specify the individual activities.....................................................................8
2. Determine the sequence of those activities..................................................8
3. Draw a network diagram............................................................................... 8
4. Estimate the completion time for each activity.............................................8
5. Identify the critical path................................................................................9
6. Update CPM diagram..................................................................................... 9
CRITICAL PATH METHOD (CPM) IN PROJECT MANAGEMENT REAL LIFE EXAMPLE
............................................................................................................................ 10
Critical path...................................................................................................... 10
Procedure for finding the critical path in a network diagram............................12
Example............................................................................................................ 13
Calculate Early Start (ES), Early Finish (EF), Late Start (LS), and Late Finish (LF)
......................................................................................................................... 14
Calculating Early Start (ES) and Early Finish (EF).............................................14
Calculating Late Start (LS) and Late Finish (LF)................................................17
Calculate the free float..................................................................................... 20
CPM LIMITATIONS................................................................................................. 21
SUMMARY............................................................................................................. 21

NETWORK COST SYSTEM..................................................................................... 22

Cost projection................................................................................................. 22
Analysis and control of costs............................................................................23
Network analysis methods................................................................................ 24
Example............................................................................................................ 24

CRITICAL PATH METHOD (CPM)

The critical path method (CPM) is a step-by-step project management technique
for process planning that defines critical and non-critical tasks with the goal of
preventing time-frame problems and process bottlenecks. The CPM is ideally
suited to projects consisting of numerous activities that interact in a complex
manner.In applying the CPM, there are several steps that can be summarized as
follows:
Define the required tasks and put them down in an ordered (sequenced)
list.
Create a flowchart or other diagram showing each task in relation to the
others.
Identify the critical and non-critical relationships (paths) among tasks.
Determine the expected completion or execution time for each task.
Locate or devise alternatives (backups) for the most critical paths.

THE ORIGINS OF CPM

The CPM was developed in the 1950s by DuPont, and was first used in missiledefense construction projects. This project management method designed to
address the challenge of shutting down chemical plants for maintenance and
then restarting the plants once the maintenance had been completed.
Since that time, the CPM has been adapted to other fields including hardware
and software product research and development. Various computer programs are
available to help project managers use the CPM.

THE ASSUMPTIONS OF CPM

Costs associated with project are divided into two components: Direct
costs and indirect costs.
Activities of the project can be expedited by crashing which involves
employing more resources.

 Crashing reduces time but enhances direct costs because of factors like
overtime payments, extra payments and wastage. Relation between time
& direct activity cost can be shown by downward sloping straight line.
Indirect costs of project increase linearly with project duration.

CPM BENEFITS
Provides a graphical view of the project
Predicts the time required to complete the project
Shows which activities are critical to maintaining the schedule and which
are not.
It shows the graphical view of the project.
It discovers and makes dependencies visible.
It helps in project planning, scheduling, and controlling.
It helps in contingency planning.
It shows the critical path, and identifies critical activities requiring special
attention.
It helps you assign the float to activities and flexibility to float activities.
It shows you where you need to take action to bring project back on track.
CPM models the events and activities of a project as a network. Activities are
depicted as nodes on the network and events that signify the beginning or
ending of activities are depicted as arcs or lines between the nodes.

The following is an example of a CPM network diagram based on the following

Work Breakdown Structure (WBS):

Landscape
Project

1.0
Design home
landscape

2.0
Put in lawn

2.2
Install
sprinkler
system

2.1
Purchase
lawn material

2.3
Plant grass

2.2.1
Identify
sprinkler
location

2.3.1
Remove
debris

2.2.2
Dig trenches

2.3.2.
Prepare soil

2.2.3
Install pipe
and hardware

2.3.3
Plant lawn
seed

3.0
Build Fence

2.4
Plant
shrubs

3.1
Aquire fence
material

3.2
Construct
fence

3.2.1
Mark fence
line and
posts

3.2.2
Install
posts

3.2.3
Install
fencing and
gates

3.2.4
Paint/stain
fence

= Summary Task or Milestone

2.2.4
Cover
sprinkler
system
= Work Package or Task

B
5 days

1 day
D

3 days

1 day

1 day

Finish
Start

A
7 days

C
2 days

H
3 days
J
2 days

L
3 days

M
5 days

N
5 days

K
G

2 days

5 days

Landscape Project Predecessor Table

WBS ID Task ID
Task
Predecessor
1.0
A
Design home landscape
2.1/3.1
B
Acquire materials
A
2.2.1
C
ID sprinkler location
A
2.2.2
D
Dig trenches
G, C
2.2.3
E Install pipe and hardware
B, D
2.2.4
F
Cover sprinkler system
E
2.3.1
G
Remove debris
A
2.3.2
H
Prepare soil
G
2.3.3
I
Plant lawn seed
G, F
2.4
J
Plant shrubs
H
3.2.1
K
Mark fence line
G
3.2.2
L
Install posts
B, K
3.2.3
M
Install fencing & gates
L
3.2.4
N
Paint/stain fence
M

Resources
Homeowner
Homeowner
Teens
Teens
Teens
Teens
Teens
Teens
Teens
Teens
Carpenter
Carpenter
Carpenter
Teens

Time Estimate
7
1
2
5
3
1
5
3
1
2
2
3
5
5

STEPS IN CPM PROJECT PLANNING

1. Specify the individual activities.
2. Determine the sequence of those activities.
3. Draw a network diagram.
4. Estimate the completion time for each activity
5. Identify the critical path (the longest path through the network)
6. Update the CPM diagram as the project progresses.
1. Specify the individual activities

From the Work Breakdown Structure, a listing can be made of all the activities
in the project. This listing can be used as the basis for adding sequence and
duration information in later steps.
2. Determine the sequence of those activities

Some activities are dependent upon the completion of others. A listing of the
immediate predecessors of each activity is useful for constructing the CPM
network diagram.
3. Draw a network diagram.

Once the activities and their sequencing have been defined, the CPM diagram
can be drawn. CPM originally was developed as an activity on node (AON)
network, but some project planners prefer to specify the activities on the arcs.
4. Estimate the completion time for each activity

The time required to complete each activity can be estimated using past
experience or the estimates of knowledgeable persons. CPM is a deterministic
model that does not take into account variation in the completion time, so only
one number can be used for an activitys time estimate.

5. Identify the critical path

The critical path is the longest-duration path through the network. The
significance of the critical path is that the activities that lie on it cannot be
delayed without delaying the project. Because of its impact on the entire
project, critical path analysis is an important aspect of project planning.
The critical path can be identified by determining the following four parameters
for each activity:
ES earliest start time: the earliest time at which an activity can begin
given that its predecessor activities must be completed first.
EF earliest finish time, equal to the earliest start time for the activity
plus the time required completing the activity.
LF latest finish time: the latest time at which an activity can be
completed without delaying the project.
LS latest start time, equal to the latest finish time minus the time
required to complete the activity.
The slack or float time for an activity is the time between the earliest and latest
start time, or between the earliest and latest finish time. Slack is the amount of
time that an activity can be delayed past its earliest start or earliest finish
without delaying the project.
The critical path is the path through the project network in which none of the
activities have slack, that is, the path for which LS=ES and LF=EF for all
activities in the path. A delay in the critical path delays the project. Similarly,
to accelerate the project it is necessary to reduce the total time required for the
activities in the critical path.
6. Update CPM diagram

As the project progresses, the actual task completion times will be known and
the diagram can be updated to include this information. A new critical path may
emerge, and structural changes may be made in the network if project
requirements change.

CRITICAL PATH METHOD (CPM) IN PROJECT

MANAGEMENT REAL LIFE EXAMPLE
The critical path method (CPM) is used extensively by project planners
worldwide for developing the project schedule in all types of projects including
IT, research, construction.
We will discuss the critical path with a real world example, identify the critical
path in a network diagram, and calculate the float for each path. We will then
list some of the benefits and limitations of the critical path method.
Once you become familiar with it, I will walk you through every step required
for calculating Early Start, Early Finish with forward pass, and then calculate
Late Start, Late Finish with backward pass.
Make sure you understand each step described, otherwise you might face some
difficulties when working with these calculations.
CRITICAL PATH

If you look at any network diagram, you will notice many paths originating
from one point and ending at another point. Every path will have some duration,
and the path with the longest duration is known as the critical path.
The critical path can be defined in many ways including:

The longest path in the network diagram, or

The shortest duration in which the project can be completed.

For example, lets say you received a project to build three buildings in one
location. The first building is the largest building, the second building is a
medium sized building, and the third building is the smallest building.
You develop the network diagram which consists of three paths; each path
resembles each building.

You calculate the duration for each path. For the first building, the duration is 31
months, the second building will take 18 months, and the third building will
require 13 months.
The first path represents the largest building; the second path represents the
medium sized building, and the third path, the smallest building.

Now, review the above diagram.

Did you notice that the path for the first building is the longest duration of all
three? It is thirteen months longer than the second path, and 18 months longer
than the third path. This means that if you start working on the first building,
you can wait 13 months before working on the second building because you can
complete second building in 18 months.
Likewise, you could wait 18 months to start working on the third building
because it will take only 13 months to complete. This means that even if you
start working on the third building after 18 months from the project start date,
you can complete it on time.
This waiting period is known as float or slack.
Which is the critical path in this network diagram of three paths?

Of course, it is the longest path on the network diagram, because you cannot
complete your project before constructing the first building. Although you can
complete the other two buildings quickly, until you complete the first building,
your project is not considered complete.

Hence, the critical path is the longest path on the network diagram.
Now, what is the shortest duration in which you can complete the project?
Sure enough, it is 31 months, because you cannot complete your project before
31 months, and this is the duration of the critical path.
Hence, the critical path is the shortest duration in which you can complete
the project.
So, you see, both definitions are the same.
We can conclude that the critical path is the sequence of activities from
start to end, and it has the longest duration among all paths in a network
diagram.
In ideal conditions, a network diagram, and therefore, the project, should have
only one critical path. However, if the network diagram has more than one
critical path, you will be in a difficult situation. In this case, you will have to
manage more than one path in parallel.
As we know, the critical path has the longest duration, and its duration is known
as the duration of the project. Since activities on a critical path have no float or
slack, no activity should be delayed. If this happens, the project will be delayed.
However, if there are delays, you can use a schedule compression tool, such as
fast tracking or schedule crashing, to bring the project on track.
PROCEDURE FOR FINDING THE CRITICAL PATH IN A NETWORK DIAGRAM

The following is the procedure to find the critical path on a network diagram:

Draw the network diagram.

Identify all paths in the network diagram.

Find the duration of each path.

The path with the largest duration is the critical path.

Lets see the above procedure in action.

EXAMPLE

Based on the below network diagram, identify the total paths, critical path, and
float for each path.

The above network diagram has five paths; the paths and their duration are as
follows:
1.
2.
3.
4.
5.

Start -> A -> B -> C-> End, duration: 31 days.

Start ->D -> E ->F -> End, duration: 18 days.
Start -> D -> B -> C -> End, duration: 26 days.
Start -> G ->H ->I -> End, duration: 13 days.
Start -> G -> E ->F -> End, duration: 16 days.

Since the duration of the first path is the longest, it is the critical path. The float
on critical path is zero.

The float for the second path Start ->D -> E ->F -> End = duration of the
critical path duration of the path Start ->D -> E ->F -> End
= 31 18 = 13 days
Hence, the float for the second path is 13 days.

Using the same process, we can calculate the float for other paths as well.
Float for the third path = 31 26 = 5 days.
Float for the fourth path = 31 13 = 18 days.
Float for the fifth path = 31 16 = 15 days.
Calculate Early Start (ES), Early Finish (EF), Late Start (LS), and Late Finish (LF)

We have identified the critical path, and the duration of the other paths, its time
to move on to more advanced calculations, Early Start, Early Finish, Late Start,
and Late Finish.
Calculating Early Start (ES) and Early Finish (EF)

To calculate the Early Start and Early Finish dates, we use forward pass; we will
start from the beginning and proceed to the end.
Early Start (ES) for the first activity on any path will be 1, because no activity
can be started before the first day. The start point for any activity or step along
the path is the end point of the predecessor activity on the path plus one.
Formula used for calculating Early Start and Early Finish dates.

Early Start of the activity = Early Finish of predecessor activity + 1

Early Finish of the activity = Activity duration + Early Start of activity
1

Early Start and Early Finish Dates for the path Start -> A -> B -> C -> End

Early Start of activity A = 1 (Since this is the first activity of the path)
Early Finish of activity A = ES of activity A + activity duration 1
= 1 + 10 1 = 10
Early Start of activity B = EF of predecessor activity + 1
= 10 +1 = 11
Early Finish of activity B = ES of activity B + activity duration 1
= 11 + 12 1 = 22
Early Start of activity C = EF of predecessor activity + 1
= 22 +1 = 23
Early Finish of activity C = ES of activity C + activity duration 1
= 23 + 9 1 = 31

Early Start and Early Finish Dates for the path Start -> D -> E -> F -> End

Early Start of activity D = 1 (Since this is the first activity of the path)
Early Finish of activity D = 1 + 5 1 = 5
Early Start of activity E = EF of predecessor activity + 1
Now there is a trick. Since the Activity E has two predecessor activities, which
one will you select? You will select the activity with the greater Early Finish
date. Early Finish of activity D is 5, and Early Finish of activity G is 3 (we will
calculate it later).
Therefore, we will select the Early Finish of activity D to find the Early Start of
activity E.
Early Start of activity E = EF of predecessor activity + 1 = 5 + 1 = 6
Early Finish of activity E = 6 + 7 1 = 12
Early Start of activity F = 12 + 1 = 13
Early Finish of activity F = 13 + 6 -1 = 18

Early Start and Early Finish Dates for the path Start -> G -> H -> I -> End

Early Start of activity G = 1 (Since this is the first activity of the path)
Early Finish of activity G = 1 + 3 1 = 3
Early Start of activity H = 3 + 1 = 4
Early Finish of activity H = 4 + 4 1 = 7
Early Start of activity I = 7 +1 = 8
Early Finish of activity I = 8 + 6 1 = 13
Calculating Late Start (LS) and Late Finish (LF)

We have calculated Early Start and Early Finish dates of all activities. Now it is
time to calculate the Late Start and Late Finish dates.
Late Finish of the last activity in any path will be the same as the Last Finish of
the last activity on the critical path, because you cannot continue any activity
once the project is completed.
Formula used for Late Start and Late Finish dates:

Late Start of Activity = Late Finish of activity activity duration + 1

Late Finish of Activity = Late Start of successor activity 1

To calculate the Late Start and Late Finish, we use backward pass; i.e. we will
start from the last activity and move back towards the first activity.
Late Start and Late Finish Dates for the path Start -> A -> B -> C -> End

On a critical path, Early Start, and Early Finish dates will be the same as Late
Start and Late Finish dates.

Late Start and Late Finish Dates for the path Start -> D -> E -> F -> End

Late Finish of activity F = 31 (because you cannot allow any activity to cross
the project completion date)
Late Start of activity F = LF of activity F activity duration + 1
= 31 6 +1 = 26
Late Finish of activity E = LS of successor activity 1
= LS of activity F 1
= 26 1 = 25
Late Start of Activity E = LF of activity E activity duration + 1
= 25 7 + 1 = 19
Late Finish of activity D = LS of successor activity 1
If you look at the network diagram, you will notice that activity D has two
successor activities, B and E. So, which activity will you select?
You will select the activity with the earlier (least) Late Start date. Here, Late
Start of activity B is 11, and Late Start of activity E is 19.
Therefore, you will select activity B which has the earlier Late Start date.

Late Finish
= 11 1 = 10

of

activity

LS

of

activity

Late Start of Activity D = LF of activity D activity duration + 1

= 10 5 + 1 = 6
Late Start and Late Finish Dates for the path Start -> G -> H -> I -> End

Late Finish of activity I = 31 (because you cannot allow any activity to cross
the project completion date)
Late Start of activity I = 31 6 + 1 = 26
Late Finish of activity H = 26 1 = 25
Late Start of activity H = 25 4 + 1 = 22
Late Finish of Activity G = 19 1= 18 (we will choose the late start of activity
E, not activity H, because the Late Start of activity E is earlier than the Late
Start of activity H)
Late Start of activity G = 18 3 + 1= 16
Calculate the free float

Formula for the Free Float:

Free Float = ES of next activity EF of current activity 1

CPM LIMITATIONS

Because the critical path method is an optimal planning tool, it always

assumes that all resources are available for the project at all times.

It does not consider resource dependencies.

There are chances of misusing float or slack.

Less attention on non-critical activities, though sometimes they may also

become critical activities.

Projects based on the critical path often fail to be completed within the
approved time duration.

CPM was developed for complex but fairly routine projects with minimal
uncertainty in project completion times. For less routine projects there is more
uncertainty in the completion times, and this uncertainty limits the usefulness of
the deterministic CPM model. An alternative to CPM is the PERT (Program
Evaluation and Review Technique) project planning model, which allows a
range of durations to be specified for each activity.
To overcome these shortcomings of the critical path, the critical chain method
was developed. In the critical chain method resource constraints are also taken
into consideration while developing the network diagram.

SUMMARY
The critical path method has helped many project managers develop and
manage their schedule. In the critical path method, you will draw a network
diagram with multiple paths. The path with the longest duration is known as the
critical path. During your project execution your main emphasis will be on this
path, because this is the longest duration path and the duration of this path will
be duration of the project.
As a project manager you have to keep an eye on your network diagram and
take prompt corrective action whenever necessary.

NETWORK COST SYSTEM

The techniques of PERT and CPM are essentially time-oriented. They seek to
answer questions like:
What is the most desirable time schedule of activities?
How much time would it take, on an average, to complete the project?
What is the probability of completing the project in a specified time?
Such analysis largely overlooks the cost aspect which is usually as important as
the time aspect and sometimes even more. To provide a vehicle for cost
planning and control of projects, the network cost system was developed. This
represents a very useful supplement to the traditional time oriented network
analysis. Let us look at cost projection and cost analysis and control under the
network cost system.

COST PROJECTION

The basic principle of the network cost system is fairly simple: costs are
planned, measured, analyzed, and controlled in terms of project activities.
Though simple, this principle represents a departure from the conventional cost
accounting system where costs are generally planned, measured, analyzed and
controlled in terms of functions or organizational divisions.
Once costs are estimated in terms of activities, cost projections can be made for
any chosen schedule. For cost projection it is usually assumed that the
expenditure for any activity is incurred evenly over the duration of the activity.
Where this assumption does not appear valid, the activity should be divided into
two or more sequential components, such that for each of the components the
expenditure occurs uniformly over its duration. The projected cost curve for a
given schedule and activity wise cost estimates can be readily obtained.

ANALYSIS AND CONTROL OF COSTS

As the project progresses, the following can be measured/ estimated

periodically for purposes of monitoring and control:
1. Costs incurred to date: In a network cost system, costs are recorded
activity wise. Costs incurred to date can be obtained by summing up costs
for various activities.
2. Budgeted costs to date: Budgeted costs to date can be readily obtained
from the cost projections made at the beginning.
3. Value of work done to date: When costs are measured, an estimate should
also be made of the extent of the work accomplished. The value of work
done can then be obtained as follows: budgeted costs percentage work
accomplished. This may be illustrated by an example. A certain activity
has a budgeted cost of Rs. 80,000 and at the time of the periodic progress
review it is estimated that 60 percent of the work has been accomplished.
So the value of the work done is put at Rs. 80,000 60 percent = Rs.
48,000.
4. Cost over-run(under-run) to date : There is cost over-run when the cost
incurred is more than the value of work done. Similarly there is cost
under-run when the cost incurred is less than the value of work done.
Cost over-run(under-run) is usually expressed in percentage terms. It is
defined as follows:
Actual costValue of w ork completed
100
Valueof work completed

5. Time over-run(under-run) to date : There is time over-run if the project is

behind schedule. Likewise there is time under run if the project is ahead
of schedule. Time over-run(under-run) is usually define din terms of
months behind or months ahead.

NETWORK ANALYSIS METHODS is a group of special analytical methods

that are used in cases where it is necessary to analyze and optimize a network of
interconnected and related elements that have some connection between one
another.
The network analysis methods are used in project management where the
elements are key activities of the project in the mutual time relation. Another
possibility of their use is in the field of logistics and transportation, where the
elements represent the centre and the dependencies are spatial (also figuratively
temporal). Apart from Critical Path Method, PERT Method (Program
Evaluation and Review Technique) can also be used.
The network analysis methods are related to the concept of network diagram,
which is a view of the project as a diagram which expresses various links
between the project activities. The network diagrams and network analysis
methods are based on the Graph Theory.
In project management, network diagrams are used both edge-rated (defined),
where the edges of the graph represent the activities of the project and nodes of
their connection (or events between activities), and graphs nodal rated (defined),
where graph nodes represent the activities and edges represent relations between
them.
EXAMPLE

The three graphs are shown. The first graph shows budgeted costs (curve A),
actual costs (curve B) and value of work (curve C). The second graph shows
percentage cost over-run or under-run (curve D). It may be noted that curve D is
derived from curves B and C. The vertical distance between curves B and C is
divided by the height of curve C and multiplied by 100 to get curve D. The third
graph shows number of months by which the project is behind or ahead of the
schedule (curve E). Curve E is derived from curves A and C. The months
behind/ahead at any particular point of time is simply the horizontal distance
(measured in months) of curve C at that point of time from curve A. The figure
provides information about time and cost, budget and actual, at one place and is
a very useful device for monitoring and control.