Case

LAUNCH

study
ON
OF NEW CREDIT

CARD
USING PERT AND CPM

SUBMITTED BY
POONAM SINGH
11035287030

INTRODUCTION TO
OPERATIONAL
RESEARCH
Operational Research is a systematic and
analytical approach to decision making
and problem solving.
It is typically concerned with
determining the maximum profit, sale,
output, crops yield and efficiency .
And minimum losses, risks, cost, and
time of some objective function.
Some of the PRIMARY TOOLS used by
operation researchers areSTATISTICS
GAME THEORY
PROBABILITY THEORY, etc.

SCIENTIFIC APPROACH
OR applies scientific methods,
techniques and tools for the purpose of
analysis and solution of the complex
problems.
In this approach there is no place for
guesswork and the person bias of the
decision maker.

OBJECTIVE
Operational Research always try to find
the best and optimal solution to the
problem.
For this purpose objectives of the
organization are defined and analyzed.
These objectives are then used as the
basis to compare the alternative
courses of action.

METHODOLOGIES/APPROACHE
S OF OPERATIONAL RESEARCH
1. ORIENTATION

2. PROBLEM DEFINITION

3. DATA COLLECTION

4. MODEL FORMULATION

5. SOLUTION

6. ANALYSES AND INFORMATION

7. IMPLEMENTATION AND
MONITORING

C
K

Project

project is a series of
activities directed to
accomplishment of a
desired
objective.
Plan your work first..then
work your plan

CPM - Critical Path Method

Definition: In CPM activities are shown as a network of

precedence relationships using activity-on-node
network construction
Single estimate of activity time
Deterministic activity times

USED IN : Production management - For the jobs of

repetitive in nature where the activity time estimates
can be predicted with considerable certainty due to
the existence of past experience.

PERT Project Evaluation & Review Techniques

Definition: In PERT activities are shown as a network

of precedence relationships using activity-on-arrow
network construction
Multiple time estimates
Probabilistic activity times

USED IN : Project management - for nonrepetitive jobs (research and development work),
where the time and cost estimates tend to be quite
uncertain. This technique uses probabilistic time
estimates.

PERT
PERT is based on the assumption that an activitys
duration follows a probability distribution instead of
being a single value.
Three time estimates are required to compute the
parameters of an activitys duration distribution:
Pessimistic Time (tp ) - the time the activity would
take if things did not go well
Most Likely Time (tm ) - the consensus best
estimate of the activitys duration
Optimistic Time (to ) - the time the activity would
take if things did go well

Critical Path
It

is the sequence of
activities and events where
there is no slack i.e.. Zero
slack

Longest

path through a

network
Minimum project completion

Crashing
Project

completion times may

need to be shortened because
Different deadlines
Penalty clauses
Need to put resources on a new
project
Promised completion dates
Reduced project completion time
is crashing
11

Project Crashing
Crash

cost
Crashing
Reducing project time by expending additional
resources
Crash time
An amount of time an activity is reduced
Cost of reducing activity time
Goal
Reduce project duration at minimum cost

darla/smbs/vit

12

Explanation of Project
Costs
Project Indirect Costs
Costs that cannot be associated with any
particular work package or project
activity.
Supervision, administration, consultants, and
interest

Project

Direct Costs

Normal costs that can be assigned

directly to
a specific work package or project activity.
Labor, materials, equipment, and
subcontractors
913

Benefits of CPM/PERT

Useful at many stages of project management

Mathematically simple
Give critical path and slack time
Provide project documentation
Useful in monitoring costs

COMPANY PROFILE

ICICI

Bank Ltd is a major banking and financial

services organization in India. The Bank is the
second largest bank in India and the largest
private sector bank in India by market
capitalization.

ICICIBank

offers variety of personal banking

cards includingcredit card, debit cards,
prepaid card, corporate cards and Visa Card in
India. ICICI Bank offers a selection of cards to
perfectly complement your distinct lifestyle
needs.

INTRODUCTION TO PROBLEM

ICICI

Bank has decided to LAUNCH the new CREDIT CARD SERVICE

for the consumer market .The problem is how to plan and control the
various phases of this project - market search, estimate expected
volume, Update physical facilities, Advertise for suppliers etc are
obvious to the management of this firm. Now we have to guide them
through this difficult situation using PERT AND CPM so that the
whole project duration is reduced as much as possible without
unnecessary additional costs.

Now the various activities with the given duration in days and
preceding activities are given below

The project will be completed using the following steps:

1.

Draw a NETWORK DIAGRAM.

2.Find out the early start, early, finish latest start and latest finish

3.Determine total float , free float and independent float

4.Find critical path

5.Find minimum time of completion of the project

6.Crashing of the project

Job name
A

B
C
D
E

F
G
H

Description

Immediate
predecessor

Conduct market search to determine size

,potential and competition in market.

Define market strategy in term

Position and product feature
Estimate expected volume

Estimate additional manpower

Identify modification required

To the present computer based
On expected volume

Implement computer modification

Updates physical activity

Prepare instruction manual for

Modification

Hire additional sales forces and

A
B
C
C

E
C
F

Job name

Description

Immediate predecessor

J
K
L
M
N

Train sales forces and operational staff

Advertise for suppliers
Check suppliers sample
Identify key supplier and define standards
Roll out basic product to few employee as
method pre-resulting
Generate and assess feedback

Modify and make change whenever

necessary

Update procedures manual

H,I
C
K
L
M,J

Re-train concerned staff

Design communication to prospective card

holders

Design advertising schedule

O
P
Q
R
S
T
U

Roll-out final product-LAUNCH

N
O
P
Q

S
T,R,G

Activity

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S

Optimisti
c Time( t
O)
(in days)

10
14
2
4
10
20
10
5
7
14
1
10
3
13
20
7
2
2
7

Most
Likely
Time(tm)
(in days)

12
15
3
6
12
25
17
6
12
17
2
15
5
15
21
9
3
2
10

Pessimisti Normal Crash

Crash
c
Cost
Time
Cost
Time( t P) (00s)
(in days) (00s)

(in days)

14
17
4
8
14
27
20
7
14
20
3
20
7
17
22
14
4
2
3

450
700
325
600
650
900
500
400
650
755
450
825
325
400
200
225
100
400
600

10
13.17
3
5
8
22.5
15.33
5
7.5
13
1
11
10
12
18
4.5
2
1
5

530
792
325
610
696
972
530
460
698
803
472
840
373
486
230
249
110
414
603

ACTIVITY OPTIMISTIC MOST

TIME(t O)
LIKELY
TIME(tm)
(in days)
(in days
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U

10
14
2
4
10
20
10
5
7
14
1
10
3
13
20
7
2
2
7
5
4

12
15
3
6
12
25
17
6
12
17
2
15
5
15
21
9
3
2
10
7
8

PESSIMISTI
C
TIME( t P)
(in days)
14
17
4
8
14
27
20
7
14
20
3
20
7
17
22
14
4
2
3
9
2

EXPECTED
DURATION
(te)=(to+4tm+
tp)/6
(in days)
12
15.17
3
6
12
24.5
16.33
6
11.5
17
2
15
5
15
21
9.5
3
2
10
7
8

NETWORK DIAGRAM
( CRITICAL PATH-1->2->3->4->5->6->8->11->12->13->14->16->17->18)

FLOAT OF EACH ACTIVITY

ACTIVITY

A(1->2)
B(2->3)
C(3->4)
D(4->7)
E(4->5)
F(5->6)
G(4->17)
H(6->8)
I(7->8)
J(8->11)
K(4->9)
L(9->10)
M(10->11)
N(11->12)
O(12->13)
O(13->14)
Q(14->15)
R(15->17)
S(14->16)
T(16->17)
U(17->18)

TOTAL FLOAT
(L j-t ij- Ei)
0
0
0
25
0
0
105.67
0
25
0
27.5
27.5
27.5
0
0
0
12
12
0
0
0

FREE FLOAT
(Ej-Ei-tij)
0
0
0
0
0
0
105.67
0
25
0
0
0
27.53
0
0
0
0
12
0
0
0

INDEPENDENT
FLOAT
(Ej-Li)-tij
0
0
0
0
0
0
105.67
0
25
0
0
0
27.53
0
0
0
0
12
0
0
0

CRASHING OF ACTIVITY
PATHS A
1
80
0
2
80
0
3
80
0
4
80
0
5
80
0
6
80
0
7
80
0

B
460
0
460
0
460
0
460
0
460
0
460
0
460
0

C
0

D
-

10
0
10
0
-

0
0

E
11
00
11
00
-

F
360
0
360
0
-

G
-

H
6000

I
1200

J
1200

K
-

6000

1200

1200

1200

1200

2200

3000

HERE:
1-> A-B-C-E-F-H-I-J-N-O-P-S-T-U
2->A-B-C-E-F-H-J-N-O-P-Q-R-U
3->A-B-C-D-I-J-N-O-P-S-T-U
4->A-B-C-D-I-J-N-O-P-Q-R-U
5->A-B-C-K-L-M-N-O-P-S-T-U
6->A-B-C-K-L-M-N-O-P-Q-R-U
7->A-B-C-G

CRASHING OF ACTIVITY
PATH
S
1

37
5
37
5
-

6
7

280 100
0
280 100
0
100
0
280 100
0
120 280 100
0
0
120 100
0
0
-

120
0
120
0
120
0
120
0
120
0
120
0
120
0

300 6000

1000

100
0
-

140 0
300 6000

1000

100
0
100
0
-

140 0
300 6000

1000

140 0
-

1000

1000

100
HERE:
0
1-> A-B-C-E-F-H-I-J-N-O-P-S-T-U
2->A-B-C-E-F-H-J-N-O-P-Q-R-U
3->A-B-C-D-I-J-N-O-P-S-T-U
4->A-B-C-D-I-J-N-O-P-Q-R-U
5->A-B-C-K-L-M-N-O-P-S-T-U
6->A-B-C-K-L-M-N-O-P-Q-R-U
7->A-B-C-G-U

1000

1000

CRASHING OF PATH LENGTH

PATHS
1
2
3
4
5
6
7

160.1
7
148.1
7
135.1
7
123.1
7
132.6
7
120.6
7
54.5

155.1
7
148.1
7
130.1
7
123.1
7
127.6
7
120.6
7
54.5

152.1
7
145.1
7
130.1
7
120.1
7
124.6
7
120.6
7
54.5

149.
17
142.
17
127.
17
117.
17
121.
67
117.
67
54.5

147.1
7
140.1
7
125.1
7
115.1
7
119.6
7
115.6
7
52.5

144.1
7
137.1
7
122.1
7
112.1
7
116.6
7
112.6
7
49.5

140.1
7
133.1
7
122.1
7
112.1
7
116.6
7
112.6
7
49.5

136.
17
133.
17
118.
17
108.
17
112.
67
112.
67
49.5

CRASHING OF PATH LENGTH

PATHS
1
2
3
4
5
6
7

135.1
7
132.1
7
117.1
7
108.1
7
111.6
7
112.6
7
49.5

133.17 131.17 129.17 127.17 123.17

130.17 128.17 126.17 122.17 117.17
115.17 115.17 113.17 113.17 109.17
106.17 106.17 104.17 104.17 100.17
109.67 109.67 107.67 107.67 107.67
110.67 110.67 108.67 108.67 108.67
47.5

47.5

45.5

45.5

45.5

CRASH

LIMITS

Crash
limits
A B C D E F G H I J K L M N O P Q R S

2 2 0 1 4 2 1 1 4 4 1 4 5 3 3 2 1 1 5

2 2 0 1 4 2 1 1 4 4 1 4 5 0 3 2 1 1 0

2 2 0 1 4 2 1 1 4 4 1 4 5 0 3 2 1 1 0

2 2 0 1 4 2 1 1 4 4 1 4 5 0 3 2 1 1 0

2 2 0 1 4 2 1 1 4 4 1 4 5 0 0 2 1 1 0

0 2 0 1 4 2 1 1 4 4 1 4 5 0 0 2 1 1 0

0 2 0 1 4 2 1 1 4 4 1 4 5 0 0 2 1 1 0

0 2 0 1 0 2 1 1 4 4 1 4 5 0 0 2 1 1 0

0 2 0 1 0 2 1 1 0 4 1 4 5 0 0 2 1 1 0

10

0 2 0 1 0 2 1 1 0 4 1 4 5 0 0 2 1 1 0

11

0 2 0 1 0 2 1 1 0 4 1 4 5 0 0 0 1 1 0

12

0 2 0 1 0 0 1 1 0 4 1 4 5 0 0 0 1 1 0

13

0 0 0 1 0 0 1 1 0 4 1 4 5 0 0 0 1 1 0

14

0 0 0 1 0 0 1 0 0 4 1 4 5 0 0 0 1 1 0

15

0 0 0 1 0 0 1 0 0 0 1 4 5 0 0 0 1 1 0

CRASHING OF ACTIVITIES
Since the activities lying on the critical path control the project
duration, we have to crash the activities lying on the critical path. Let X
denotes the number of days of project completion after crashing.
The indirect cost is Rs 3000 per day.
So, Total Cost of Project =Total Normal Cost + Total Indirect Cost
=1050500 + (160.17*3000)
=1050500 + 560595
=1531010
So, X=160.17 & F(X) =1531010
Crashing:-

1.

Reduce Activity S by 5 days

So, X=155.17
F(X) = 1531010+ (200-3000)*5
=1531010-14000
=1517010

2.

Reduce Activity N by 3 days

So, X=152.17
F(X) = 1517010+ (280-

3000)*3
=1517010-8160
=1508850

3.

Reduce Activity O by 3 days

So, X=149.17
F(X) = 1508850+ (500-

3000)*3
=1508850-7500
=1501350

4.

Reduce Activity A by 2 days

So, X=147.17
F(X)= 1501350+ (800-3000)*2
=1501350-4400
=1496950
Reduce Activity U by 3 days
So, X=144.14
F(X)= 1496950+ (1000-

3000)*3
=1496950 4600

Reduce Activity E by 4 days

So, X=140.14
F(X)= 1492350 + (1100-3000)*4
=1492350 7600
=1484750

Reduce Activity I by 4 days

So, X=136.15
F(X)= 1484750+ (1200-3000)*4
=1484750-7200
=1477550

Reduce Activity T by 1 day

So, X=141.15
F(X)= 1477550+ (1250-3000)*1
=1477550-1750
=1474000

Reduce Activity P by 2 days

So, X=139.15
F(X) = 1474000 + (1250-3000)*2
=1474000 -3500
=1472300

10.

Reduce Activity F by 2 days

So, X=137.17
F(X) = 1472300+ (3600-3000)*2
=1472300+1200
=1473500

11

Reduce Activity B by 2 days

So, X=135.17
F(X) = 1473500+ (4600-3000)*2
=1473500+3200
=1476700

12

Reduce Activity H by 1 day

So, X=134.17
F(X) = 1476700 + (6000-3000)*1
=1476700 +3000
= 1479700

13

Reduce Activity J by 4 days

So, X=130.17
F(X) = 1479700+ (12000-3000)*4
=1479700+36000
=1515700

RESULT
Our ultimate objective is to complete the
project as early as possible .In order to
save the very high administration costs,
depreciation, cost of supervision etc and to
avoid the amount of inconvenience people
have to face.
For this project the normal
completion time is 160.17 days and cost
involved is Rs 1531010/- . After applying
crashing technique the crashed time
completion is 139.16 days and cost
incurred is Rs 1472300/- .

THANK YOU