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Session 11 & 12 Time Cost Tradeoff - Transmission Line Project & Optimal Crashing

The document discusses the time-cost tradeoff in project management, illustrating how to optimize project duration and costs through resource allocation and activity crashing. It provides examples of direct and indirect costs associated with project durations, along with a detailed breakdown of activities, their durations, and costs for a new product introduction. Additionally, it highlights the importance of timely project completion in the face of competition and outlines a new objective function considering bonuses for early project completion.

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6 views

Session 11 & 12 Time Cost Tradeoff - Transmission Line Project & Optimal Crashing

The document discusses the time-cost tradeoff in project management, illustrating how to optimize project duration and costs through resource allocation and activity crashing. It provides examples of direct and indirect costs associated with project durations, along with a detailed breakdown of activities, their durations, and costs for a new product introduction. Additionally, it highlights the importance of timely project completion in the face of competition and outlines a new objective function considering bonuses for early project completion.

Uploaded by

magar.mba09
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Session 11: Time-Cost Tradeoff

Rohit Kapoor
Direct Cost Increment
900
800
780 Crash A & B by 1
700 Month each

600
560
500 Crash F & G by 2
Months each
Direct Cost

400
Increment

300
200 Crash D by 2 Months
160
100

11 12 13 14 15 16
Project Duration
Further …
• Lets say Indirect cost per day, Rs. 10,00,000/Month?
• What is total cost curve and optimal duration?
Project Direct Cost Indirect Cost Total Cost
Duration
16 1,32,00,000 1,60,00,000 2,92,00,0000

15 1,40,00,000 1,50,00,000 2,90,00,0000

14 1,48,00,000 1,40,00,000 2,88,00,0000

13 1,68,00,000 1,30,00,000 2,98,00,0000

12 1,88,00,000 1,20,00,000 3,08,00,0000

11 2,10,00,000 1,10,00,000 3,20,00,0000


Transmission Line Project
• ?
Time-Cost Trade-off – An Optimal
Approach
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.
Duration
Activity Predecessors (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
F = Assemble Products 1 and 2 C, E 12
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 competitor’s 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
10,000 20,000 3,000 30,000 40,000 50,000
Network Diagram
C8 F 12
3 5 6

A4

D2 E7
1

B4
2 4

• Two critical paths: 1 – 2 – 3 – 4 – 5 – 6


1–3–4–5–6
Optimal Approach to Transmission Line
Project
• ?
– Objective Function?
• Min Z = 0.5 × A + 0.4 × B + 100000 × C + 0.25 × D + 0.05
× E + 0.05 × F + 0.20 × G + 0.125 × H + 0.333 × I + 0.1333
× J + (X9 – X1) × 0.35
Indirect Cost
Optimal Time –Cost Trade-off Example

Completion
Activity Preceeding Times (in
Symbol Activity Description Activity Weeks)
A Site Excavation - 2
B Foundations A 3
Underground
C Utilities A 7
D Plumbing: Stage 1 B 4
E Framing B 5
F Roofing E 3
G Electrical Work F 3
H Inferior Walls D, G 4
I Plumbing: Stage 2 H 2
J Exterior Finishing F 6
K Landscaping C, I, J 2
A Situation

Normal Time
(Days)
Activity A B C D E F G H I J K
Time 10 15 35 20 25 15 15 20 10 30 10
Cost (Rs. 00000s) 2 3 10 6 12 9 6 7 3 5 3

Crash Time (Days)


Activity A B C D E F G H I J K
Time 5 10 25 15 17 10 9 10 5 20 6
Cost (Rs. 00000s) 3 4 13.5 8 16 10.5 9 11 4.5 7.5 4.5
Some Basics
K activity is the last activity
Minimize ESTK + Tk – TCk
s.t.
ESTj – ESTi ≥ Ti – TCi
TCi ≤ Crash Days Availablei
ESTi’s and TCi’s are all positive and integers
• The client has informed the contractor that the warehouse is required earlier than
originally agreed.
• A bonus scheme is offered whereby the contractor can collect Rs. 50000 for each
day that the crashed project is under the normal duration of 120 days

New Objective Function: Normal Project Cost + Crash Cost


– Bonus × (Normal Duration – Crash Duration)
Assignment 2
• Mutum Bridge

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