NETWORK ANALYSIS

Introduction
For the success of any business project on careful planning, the manager must plan, organize, and control a project that consists of a number of interrelated activities. A time saving technique is the network analysis. Best known network models are PERT and CPM.

PERT is used to plan the program in advance and to estimate the expected completion time of the entire project. It indicates the activities that might need modification regarding completion time. It allows the manager to compare actual progress of each activity and concentrate those activities that are behind schedule and may cause delay in the total project.

Definitions
Activity Network Analysis or simply called Network Analysis is a quantitative tool that is used by managers in careful planning of a series of activities to be carried out according to some sequence and specified time so that the project is finished within a specific time frame and budget. Two techniques either by a wise allocation of resources or a control of activities to monitor that they are being carried out according to plan. These are PERT and CPM

2 1

6 5

EVENTS 1 2 3 4 5 6 7 8

ACTIVITES 1-2 1-3 1-6 2-4 3-5 4-6 5-6 6-7

A network is a series of related activities that are readily identifiable. It is represented by a flow model that shows how an event leads to another event towards the completion of a work project. An event is always represented by a small circle or node. An activity is represented by an arrow that connects two events. An event does not consume time but merely indicates the beginning or ending of an activity

A node actually represents a point in time. Activity represents action and thus requires time and resources for it to be completed.

Critical Path Method

Developed by E.I du Pont de Nemours and Company in 1965 to aid them in the scheduling of some management works like routine plant overhaul, maintenance and construction work. CPM reasonably assumed that the completion time for each activity involved in a work is known. Moreover, the CPM incorporates no statistical analysis in its determination of time estimates.

CRITICAL PATH
2
11

10

Starting with the first event and by following the flow of the arrows, there are five paths that lead too the ending event 5. The total completion time for a path is the sum of the activity times along the path.

Path Path Path Path Path

12-5 1-3-2-5 1-3-5 1-3-4-5 1-4-5

7+11 = 18 6+7+11 = 24 6+9 = 15 6+5+10 = 21 8+10 = 18

The longest path with the longest running number of weeks between event 1 and 5 is the critical path. The critical path gives the earliest time of completing the entire project which is at the end of the 24th week. It has control of the completion time of the project. The time of 15 weeks cannot be the earliest time of finishing the project because even the activities on the path 1-3-5 were completed, there are still other activities in other paths not yet completed.

Mabuhay Inc. has a plan to run a production with the following characteristics:

ACTIVITY BEGINNING 1 1 1 2 3 3 4 5 6 2 3 4 5 5 6 6 7 7

ACTIVITY ENDING 4 5 6 8 5 6 7 9 7

ACTIVITY TIME

A. Construct an activity network for the production process. B. Find the critical path. C. How soon at the earliest can the production process completed?

Slack
Slack can be found for each path in an activity network. It represents the difference between the earliest time required for the completion of the entire project and the length of any path. It tells us by how much time in the beginning or the completion of activities along a path can be delayed and still complete the entire project on time. It represent time to spare.

Usually a slack time is not desired because there is cost incurred for having idle time and resources. But of course, slack time may be used in productive ways.

Crashing of Activities to Reduce Cost

Shortening the completion time of the project by reducing the time requirements for some or all of the activities on the critical path. Speeding up the completion time of an activity to reduce the completion time of the project will cost money. What is desired here is to reduce the cost for a project by making such as crash program.

For this reason cost considerations for each activity in a network and for the entire project are tackled first. The cost equation for each activity may be represented by:

Cs = As + bstn Where S = refers to the activity As = total cost of doing the activity under normal conditions bstn= cost that vary with the time requirement for an activity. tn = represents the time required for each activity under normal conditions.

Costs that include invested capital: C = As + bsT Where T represents the earliest completion time which is the time for the critical path of an activity network. If the normal time tn for an activity is reduced, lesser time will result. This lesser time is denoted by ta = actual time spent in completing an activity Crash program will speed up the completion time of an activity with a corresponding cost. Added cost is expressed by: Cs(ta-tn)2

Because the time requirement for an activity has changed, cost equation must also change with the addition of the added cost. Therefore the new cost equation for an activity whose time requirement has been crashed is: Cs = As + bstn + Cs(ta-tn) 2 For simplicity, it is assumed that bs and Cs are equal. Furthermore, the total cost for the entire project is assumed linear with respect to time so that it remains the same after crashing some activities.

example

With the following cost equation for each activity and for the entire project, reduce the critical path to 18 weeks:

C12 = P150 + P10t12 C13 = P200 + P15t13 C14 = P100 + P20t14 C25 = P225 + P5t25 C35 = P75 + P25t35 C36 = P115 + P10t36 C46 = P205 + P5t46 C57 = P80 + P30t57 C67 = P95 + P15t67 C = P500 + P10t (cost of capital) Based on the normal times given in the figure, T=21 weeks

Calculate the total cost for doing the project. The total cost must be reduced by reducing the critical path to 18 weeks. For the activity shown in the figure, the critical path is 1-2-57 as found previously. The activities along this path together with the time requirements and costs are:

ACTIVITY

NORMAL TIME (tn)

Cost

1-2

C= P150 + P10t12 = 190 265

2-5

5-7

350

One policy to reduce the critical path to 18weeks is to reduce the time requirement for each activity by 1. For this policy, the reduced times (actual times) and the new costs are: