37 Network Analysis

Dr. Savita

1. Learning Outcome

After completing this module students will be able to:

Understand the concept of Network Analysis
Understand the Importance of Network Analysis
Know classification of Network Techniques
Understand the concepts PERT and CPM
Know the similarities between PERT and CPM

2. Meaning and Concept of Network Analysis: Project formulation and Project implementations are two essential functions of project management. Project formulation ensures the scientific selection of a project whereas project implementation ensures an optimal allocation of time and resources to the project activities. All project design should have contain five elements it should systematically formulates and describe each of the basic elements i.e. inputs, activities, outputs, effects, and impact. Project design should start with defining the desired impact. So we work from the Top down i.e what effects are needed to achieve the desired impact? what outputs are needed to achieve the desired effects? and so on…

Projects should follow this hierarchy. The lowest level in the hierarchy is inputs like finances’, raw material, human resources and time. All projects perform various activities like communication, training, organization, construction and management. These activities convert inputs into outputs and all the activities are carried out for the output of goods and services.

Project management is very tough as well as challenging task with many complex responsibilities. Luckily, many tools and techniques are available to support the tasks and performing the responsibilities efficiently. Some require computer knowledge, whereas others can be used manually. It is a duty of the project managers to choose a proper project management tool that best suits their management style. No one tool can serve all project management needs. Project design and network analysis are important tools for effective implementation of the project. They are very useful for development of a detailed work plan of the project and project time profile. A project consists of a numerous activities. It is examined in detail and details are utilized to compile the series wise explanation of the constituent activities of a project. The compilation is known as the project logic. When it is presented in the form of a graphical presentation, it is called the network.

3. Importance of Network Analysis/Network technique: A project has divided into many small activities and these activities can be analyzed with the help of network technique to achieve the objectives of the project.

Network analysis helps management to minimize the total cost and total maintenance time. With the use of network analysis cost of production can be minimized through reducing the maintenance time.
Network analysis ensures the effective utilization of limited resources. It also ensures the optimal use of resources and help to control the idle resources so that project can be effectively executed within the budgeted costs and scheduled time.
Network analysis facilitates co-ordination among the activities as well the persons responsible for project.
Time management plays a crucial role in every project. Sometimes available resources have to be arranged with a view to reduce the total time for the project rather than reducing the cost of the project. Network analysis helps the managers to manage activities without any delay.
Network analysis is grea t tool which helps in planning, scheduling and controlling the activities of the project.
Network analysis also creates inter-relationship as well as inter-dependence of various activities of project. It helps in integrating the project planning and this relationship assists in bringing out the technological inter-dependence of the various activities.
Network analysis provides the project formulation team an apparent picture of the work elements and also sequential relationship of the project.

4. Classification of Network Techniques: There are number of network techniques which are used by the various people according to their purpose. The main techniques are given below:

CPM: It is popularly known as Critical Path Method. Critical path method is a project management tool used to formulate a time frame for a project in order to determine where potential delays are most likely to take place.
PERT: The Programme Evaluation and Review Technique is basically a scheduling technique. It helps project manager in planning, scheduling, monitoring, evaluating, and controlling large and complex projects. It is a probabilistic model and introduces uncertainties in project network.
GERT: The Graphical Evaluation and Review Technique is a new technique and superior over the above mentioned techniques. In this analysis only simulation can be used.
LOB: It is known as Line of Balance technique. Line of balance is a graphical technique to show the progress achieved during the project with the help of key events.
PERT/Cost: It is an extension of the PERT technique to cover the cost of project. It is not only helpful to plan the completion of project within a specific time but also within a specific cost.
WASP: It is known as Workshop Analysis Scheduling Programme. This method is propounded by The British Energy Authority.

Though there are several techniques but the most commonly used network techniques are PERT and CPM which will be discussed in detail.

5. Programme Evaluation and Review Technique (PERT): Project Programme Evaluation and Review Technique, which is generally popular as PERT, is a sophisticated and a fairly new tool used by the management for planning and control in the case of special project. It is primarily a scheduling technique. It shows any project or job as a set of processes of operations called activities which must take place in a certain sequence. It involves diagrammatic presentation of activities and events involved in a long term project. The diagrammatic presentation is known as Network Drawing/technique and these techniques are most commonly used in project management. PERT was developed in 1958 as a result of collaboration between the operational research division of the United States Navy and a team of management consultants known as Boose Allen and Hamilton. It was developed as a management tool to aid for completing Poloris Ballistic Missile Project which had 250 prime contractors and over 9000 sub contractors engaged in research, development, construction, testing and production of missiles, guidance system and maintenance system. Since then, it has been adopted by many enterprises in different industries. So PERT schedules the sequence of activities to be completed in order to accomplish the project within a short period of time.

Basic objective of PERT is to control time. The execution of project becomes very difficult where long times involved in the planning and scheduling of the project because it involved lot of complexities and inter related activities. So for the successful implementation of the project, project manager is to take some important decisions such as estimation of resource requirement, time for each activity, and maintaining inter-relationship amongst the activities. Thus each project involves various decisions about:

What is the expected completion time of project?
What will be the effect of any delay on the activity/ project?
What type of additional resources needed if project has to be completed before scheduled time?
What is the probability of completing the project in time?

PERT is helpful to the project manager for taking decisions about these questions. It is a technique which helps project manager in planning, scheduling, monitoring, evaluating and controlling large and difficult projects. In simple words we can say that projects whose time duration of activities is not exactly known, PERT is used. It depends upon three time estimates of activities.

In PERT below three estimates of time are used:

The most optimistic time (t o): The minimum time that would be required to perform the activity if everything goes extremely well, the chance of such an optimum activity actually takes place is one in hundred.
The most likely time (t m): The length of time that will, in all probability, be required to perform the job under the given circumstances or normal circumstances.
The most pessimistic time (t p): This is the longest or maximum probable time involved if everything that might logically go wrong does actually go wrong. It includes time for unusual days or unforeseen circumstances. The chance of its happening might also be one in hundred or very less.

With the help of these above mentioned time estimates i.e. optimistic time, most likely time, and pessimistic time, average expected time for each activity would be determined.

Average expected time of the activity= to+4tm+tp/6

Procedure followed in PERT

First of all, the network of activities is drawn to indicate what activity follows what.
Then estimation of time to complete each activity is noted on the network.
Estimation of minimum time taken to complete the project.
Identification of critical activities and allocation of resources so that project can be completed in time.
Calculation of project variability duration and profitability of the project in given period.
In order to complete project in time closer watch on critical and other activities.

Advantages of PERT

It is very helpful in determine the schedule for a project within time limit.
It helps the management to optimum allocation of resources for the project.
It helps in taking right decision for the projects at a right time.
It is very helpful in determine the expected duration of activities.
It helps the management in handling the uncertainties involved in the project.
It helps the management to reduce the risk element in the project.
It suggests area of increasing efficiency, decreasing cost and maximizing profits.
It helps in co-coordinating the various activities involved in a project.
It enables the use of statistical analysis.
It enables a manager to know in advance, where the trouble may occur, where more supervision needed, and where resources may be transferred to keep the project on schedule.

Limitations of PERT

Although PERT have many advantages, but it also suffers from certain limitations. These are:

PERT emphasis only on time. It ignores the cost of a project.
It cannot be useful for programmes that are indefinite and vague.
Assumption of normal probability distribution is not true.
It does not consider the matter of resources required for various types of activities of a project.
It seems to be simple but in reality its application is too complex.
It is not practicable for routine planning of recurring events.

6. CPM (Critical Path Method): Project Another important method of networking is Critical Path Method. Critical path method was developed in 1956-1957 at the E.I.Dupent Nemours and Co., USA in connection with the periodic overhauling and maintenance of a chemical plant. Critical Path Method basically is a special application of analysis for planning and scheduling. Critical path method was basically developed with the objective of reducing duration and cost of the project. Critical path method is a special application of network analysis. It uses network analysis for scheduling production, construction projects as well as research and development activities. It is also useful in situations which require estimates of time and performance. Critical path method deals with repetitive type projects, such as overhaul of generating plant, which has to be carried repeatedly after set time intervals.

The critical path, is the overall time, it will take to complete the project. It is the longest path in time through the network. In other words, the longest path in the network is called critical path. Identifying the critical path is of great importance as it determines the duration of entire project. Critical path method differentiates between the planning and scheduling of the project.

A Critical path method is a very important project management tool used to formulate a time frame for a project in order to determine where potential delays are most likely to occur. The process includes a step by step process that provides the developer with a visual representation of potential bottleneck, throughout the course of the project.

7. Identification of the Critical Path: Project CP is the longest time path through the network. The path can be identified by determining the following parameters for each activity:

Earliest start time for activity (ES): It is the earliest possible time at which the activity should start if only the ongoing activities are first completed.
Earliest finish time (EF): It is the earliest possible time to finish the activity. It is equal to the earliest start time for activity plus the time required completing the activity.
Latest possible finish time for activity (LF): It is the latest time at which the activity can be completing without any postpone or within the time framework.
Latest possible start time for activity (LS): it is the latest start time for an activity and equal to the latest finish time minus the time required to complete the activity.
Slack time: Slack time is the difference between earliest start time for activity and latest start time for activity, or between earliest finish time for activity and latest finish time for activity.

Now we will understand it with the help of following example.

Here the information regards the jobs involved in the project with their time duration. Now we have to find out the earliest possible time for completing the project.

Job	Activity	Time Duration
A	1-2	6 days
B	2-4	4 days
C	2-3	5 days
D	3-4	4 days
E	4-5	7 days
	Total	26

From the given data, we can draw the following network diagram:

In this diagram, the jobs have been shown in the form of arrows leading from one circle to another. In simple words the arrow connecting circles 1 and 2 represents job A and so on. All the activities have been reduced to a network diagram together with the information as regard to time required for the completion of different jobs. In this diagram, there are two paths- the first connects circles 1, 2, 4, and 5 and takes 17 days. The second path connects circles 1, 2, 3, 4, and 5 and takes 22 days. The longest path, called the critical path takes 22 days and hence the minimum time required to complete the project will be 22 days.

So in order to complete the project within scheduled time, attention will have to be given to this path since any delay in time on any job or activity in this path will delay the completion of the project. In case the completion time is to be reduced, steps will have to be taken to reduce the time required for various activities of this path.

Advantages of Critical path method

The following are the advantages of CPM:

It is very useful for scheduling and controlling of large projects.
It is simple concept and not mathematically complex.
It is very helpful in pinpoint activities that needed to be closely watched.
In CPM, Project documentation and graphics point out who is responsible for various activities.
It is applicable to a wide variety of projects.
It is very useful in monitoring schedules and costs.
It makes better and detailed planning possible.
It is helpful at many stages of project management.
It enables standard method for communicating project plans, schedules, time and cost performance.
With the help of CPM most critical activities are identified and thus more attention can be paid to these activities for the successful completion of project.

Limitations of CPM

It ignores to incorporate statistical analysis in determining the time estimates.
It is presumed in CPM that there is a precise known time that each activity in the project will take. But in reality it is not happen.
Basically it developed as a static planning model and not as a dynamic controlling device. So it cannot be used as a dynamic controlling device.

8. Similarities between PERT and CPM: PERT and CPM both are the networking techniques. Both are the important tools of project implementation. Below are the similarities between PERT and CPM:

Both PERT and CPM have the same procedure and network diagrams are used in the both the techniques.
Both PERT and CPM are used to determine the earliest/latest start and finish times for each activity.
Both PERT and CPM techniques help management to plan, schedule and control the project.
All significant task and activities are defined in the project by both the techniques.
The networking principles used in both the techniques is more or less the same.

Comparison between PERT and CPM

Although both techniques share some common characteristics, yet there are some differences between them.

Origin: the origin of PERT is military organization whereas origin of CPM is chemical plant (industry).
Uncertainty: in PERT estimates are uncertain whereas in CPM does not allow any uncertainty.
Nature: PERT is used for non-repetitive jobs whereas CPM is used for repetitive jobs.
Time/Cost: PERT stresses on time based concept whereas CPM stresses on cost based concept.
Model: PERT is a probabilistic model whereas CPM is a deterministic model.
Time estimates: PERT has three time estimates whereas CPM has only one single estimate of time.
Critical activities/Dummy activities: in PERT, Critical activities is not used whereas in CPM dummy activities is not used.
Suitability: PERT is suitable where high precision is required in time estimates such as defence projects whereas CPM is suitable where reasonable precision is required such as civil construction.
Event /Activity: PERT is an event oriented whereas CPM is an activity oriented.

9. Summary: Project formulation ensures the scientific selection of a project whereas project implementation ensures an optimal allocation of time and resources to the project activities. Project management is very tough as well as challenging task with many complex responsibilities. Many tools and techniques are available to support the tasks and performing the responsibilities efficiently. . Project design and network analysis are important tools for effective implementation of the project. They are very useful for development of a detailed work plan of the project and project time profile. A project consists of a numerous activities. It is examined in detail and details are utilized to compile the series wise explanation of the constituent activities of a project. The compilation is known as the project logic. When it is presented in the form of a graphical presentation, it is called the network. Network analysis is a successful technique regularly used to plan, monitor and control the projects involving thousands of activities. There are basic two applications of network analysis that is PERT and CPM. PERT deals with the activities whose duration is not exactly known and CPM is the longest time path through the network.

Learn More

Suggested Readings:

Projects: Planning, Analysis, Selection, Implementation & Review, Prasanna Chandra, Tata McGraw-Hill Publishing
Project Management: A Managerial Approach, Jack R. Meredith, Wiley Publications
Project Management: A Development Perspective, Goyal B.B., Deep & Deep Publications.
Project Planning and Control, Mohsin M., Vikas Publishing House.
Project Management, Chaudhary, S., Tata Mc Graw Hill Publications.
Project Management, Maylor, Pearson Education
United Nations Industrial Development Organization, Guide to Practical Project Appraisal–Social Benefit Cost Analysis in Developing Countries, Oxford & IBH.

Points to ponder:

Project formulation and Project implementations are two essential functions of project management.
Project formulation ensures the scientific selection of a project whereas project implementation ensures an optimal allocation of time and resources to the project activities.
Network analysis helps management to minimize the total cost and total maintenance time.
CPM: It is popularly known as Critical Path Method. Critical path method is a project management tool used to formulate a time frame for a project in order to determine where potential delays are most likely to take place.
PERT: The Programme Evaluation and Review Technique is basically a scheduling technique. It helps project manager in planning, scheduling, monitoring, evaluating, and controlling large and complex projects. It is a probabilistic model and introduces uncer tainties in project network.