Time-Cost Tradeoff -

Optimal Approach & PERT

Rohit Kapoor
 An Illustration
A company is about to introduce a new product (product 3).
One unit of product 3 is produced by assembling 1 unit of
product 1 and 1 unit of product 2.
Before production begins on either product 1 or product 2,
raw materials must be purchased and workers must be
trained.
Before products 1 and 2 can be assembled into product 3,
the finished product 2 must be inspected.
A list of activities and their predecessors and of the
duration of each activity is provided in the Table 1. Durati
Predecess on
Activity ors (Days)
A = Train Workers - 6
B = Purchase Raw
Materials - 9
C = Produce Product 1 A, B 8
D = Produce Product 2 A, B 7
E = Test Product 2 D 10
 Further
At a recent meeting, it was brought to the notice
of the board, that a competitor is also planning to
introduce a similar product.
Further, the competitors product is scheduled to
hit the market 26 days from now, so company
must introduce the product within 25 days.
The company, by allocating additional resources,
can reduce the duration of any activity by up to 5
days.
The cost per day of reducing the duration of an
activity is shown in Table 2.A B C D E F
10,00 20,00 30,00 40,00 50,00
0 0 3,000 0 0 0
 Linear Programme
Min Z = 10 A + 20 B + 3 C + 30 D + 40 E + 50 F
s. t.A 5
B5
C5
D5
E5
F5
X3 X1 + 6 - A
X2 X1 + 9 - B
X5 X3 + 8 - C
X4 X3 + 7 - D
X5 X4 + 10 - E
X6 X5 + 12 - F
X3 X2
X6 X1 25
 PERT

Rohit Kapoor
 PERT
Program Evaluation and Review
Technique
For each activity
Project manager estimates the following
three quantities
a = Estimate of the activitys duration under the
most favorable conditions
b = Estimate of the activitys duration under the
least favorable conditions
m = Most likely value for the activitys duration
 Modeling Aspects
Tij = random variable be the duration
of activity (i, j)
E(Tij) = (a + 4m + b)/6 & Var (Tij) = (b a)2/36
 An Illustrative Example
Predecess
Activity ors a b m
A = Train Workers - 5 13 9
B = Purchase Raw
Materials - 2 10 6
C = Produce Product 1 A, B 3 13 8
D = Produce Product 2 A, B 1 13 7
E = Test Product 2 D 8 12 10
F = Assemble Products 1
and 2 C, E C9 15 12 F
3 5 6

D E
1

B
2 4
 A Question
What is the probability that the project will
be completed within 35 days?
 Present Case
?