Chapter

Project Management

DISCUSSION QUESTIONS
1. Software is an essential element for successful management of complex projects. It can
provide information on completion performance of critical activities, highlight activities
that need additional resources, and suggest the project duration that will minimize costs.
However, whether projects are large or small, the people who manage them or perform
the activities will ultimately determine the outcome of the project. The project manager
must have the ability to coalesce a diverse group of people into an effective team. The
organization of the firm must also be conducive to cross-functional inputs.
2. This question is best used when it is given as an assignment prior to class. Responses will
vary, but rely on the students with some business experience. The projects do not have to
be large ones. Stories in the headlines include natural disasters (earthquakes, fires,
tornadoes, and hurricanes), cleanup of oil spills, and delays in the introduction of new
products.
3. This question is best used when it is given as an assignment before class so that the
students will have a chance to think about it before discussion. Most everyone should be
able to describe some project they have been a part of. Common ones include preparing a
high-school yearbook, planning a major party, building a new home, and organizing a
banquet for a club or student group. Take time to elicit examples of activities and their
interrelatedness. Press the students for the reasons behind their rating of the project
manager. If the student is the project manager, ask the student what s/he thinks are
positive attributes for a project manager in such an example.

Project Management

PROBLEMS
1. a.

AON network diagram

D
2
B
4
Start

A
J2

E
1

G
3
F
8

H
5
7

CHAPTER 3

29

Finish

C
5

I
4

b. The critical path is ACFHJ with a completion time of 27 days.

c.
Activity
A
B
C
D
E
F
G
H
I
J

Duration
2
4
5
2
1
8
3
5
4
7

Earliest
Start
0
2
2
6
6
7
8
15
15
20

Latest
Start
0
3
2
15
16
7
17
15
16
20

Earliest
Finish
2
6
7
8
7
15
11
20
19
27

Latest
Finish
2
7
7
17
17
15
20
20
20
27

Total
Slack
0
1
0
9
10
0
9
0
1
0

On Critical
Path?
Yes
No
Yes
No
No
Yes
No
Yes
No
Yes

d. Free slacks: activity G has 9 days; activity H has zero days; and activity I has 1 day.
2. a.

AON diagram
B
2
Start

A
7

D
4
C
4

b.

F
3
E
4

Finish
G
5

The critical path is ACDEG with a completion time of 24 days.

30

PART 1

Activity
A
B
C
D
E
F
G

c.

3. a.

Using Operations to Compete

Duration
7
2
4
4
4
3
5

Earliest
Start
0
7
7
11
15
19
19

Latest
Start
0
9
7
11
15
21
19

Latest
Finish
7
11
11
15
19
24
24

Slack
0
2
0
0
0
2
0

On Critical
Path?
Yes
No
Yes
Yes
Yes
No
Yes

The free slacks for all activities in days are: A(0); B(2); C(0); D(0); E(0);
F(2); and G(0).
AON diagram
A
4

C
5

Start
B
10

b.

Earliest
Finish
7
9
11
15
19
22
24

D
15

F
4

E
12

G
8

H
7

The critical path is BEGH with a completion time of 37 weeks.

Results
Solver - Project Management: Single Time Estimate
Project time
Early
Activity Start
A
0
B
0
C
4
D
10
E
10
F
25
G
22
0H
30

37
Total
Late
Late
Activity
Start
Finish
Slack
2
6
2
0
10
0
6
11
2
11
26
1
10
22
0
26
30
1
30
22
30
37
30
37
0

Early
Finish
4
10
9
25
22
29

Project Management

4. a.

CHAPTER 3

AON diagram
A
3
B
4
Start

E
7

I
4
G
4

F
2

C
5

J
3
Finish

H
6

D
4

b.

K
3

The critical path is AEGI with a completion time of 18 days.

Activity
A
B
C
D
E
F
G
H
I
J
K

Duration
3
4
5
4
7
2
4
6
4
3
3

Earliest
Start
0
0
0
0
3
5
10
7
14
14
13

Latest
Start
0
3
2
3
3
7
10
9
14
15
15

Earliest
Finish
3
4
5
4
10
7
14
13
18
17
16

Latest
Finish
3
7
7
7
10
9
14
15
18
18
18

Total
Slack
0
3
2
3
0
2
0
2
0
1
2

On Critical
Path?
Yes
No
No
No
Yes
No
Yes
No
Yes
No
No

31

32

PART 1

5. a.

Using Operations to Compete

The AON network is:

Start

b.

Finish

Activity slacks for the project:

Start
Activity

Earliest

A
Yes B
Yes C
Yes D
No E
No F
Yes G

Latest
0
4
11
11
14
20
30

Finish
Earliest
Latest
0
4
4
11
11
20
13
14
16
28
20
30
30
41
Yes

Total
Slack
4
11
20
16
30
30
41

Critical
Path?
0
0
0
2
2
0
0

Critical path is ABCFG, and the project completion date is week 41.
c.

Free slacks: activity D has zero weeks and activity E has 2 weeks.

Project Management

6. a.

CHAPTER 3

The AON diagram is:

10
4

EF 10

ES ID
13

LS
DUR

Start

30

LF

Finish

5
9
9
29 9

11

13

17

17

17

17

17 12

H
29

b.
c.
d.
e.

The critical path is: BEGH, which takes 29 weeks.

The total slack for activity A = 10 4 = 6 weeks.
The total slack for activity D = 13 7 = 6 weeks.
If A takes 5 weeks, then D will have 10 5 = 5 weeks slack.
Activity F has the most free slack at 6 weeks.

7. Web Ventures Inc.

Activity
A
B
C
D
7.11 E

a.

Optimistic
(a)
3
12
2
4
1

Most Likely
(m)

Pessimistic
(b)

8
15
6

19
18
16

9
15
7

9
4

Activity Statistics
Expected Time
Variance
2
( te )
( )

20
7

te A 3 4 8 19 6 54 6 9 days
te B 12 4 15 18 6 90 6 15 days
teC 2 4 6 16 6 42 6 7 days
te D 4 4 9 20 6 60 6 10 days
te E 1 4 4 7 6 24 6 4 days

7.11
1.00
5.44
10
1.00

33

34

b.

PART 1

Using Operations to Compete

2 A 19 3 6 2 7.11
2 B 18 12 6 2 1.00
2C 16 2 6 2 5.44
2 D 20 4 6 2 7.11
2 E 7 1 6 2 1.00

8. a.

The expected activity times (in days) are:

Activity

Optimistic

Most Likely

Pessimistic

te

A
B
C
D
E

5
4
5
2
4

8
8
6
4
7

11
11
7
6
10

8.00
7.83
6.00
4.00
7.00

Path
AC
ADE
BE

1.00
1.36
0.11
0.44
1.00

Total Expected Time

8 + 6 = 14.00
8 + 4 + 7 = 19.00
7.83 + 7 = 14.83

The critical path is ADE because it has the longest time duration. The
expected completion time is 19 days.
b.

T TE
2

Where T = 21 days, TE = 19 days, and the sum of the variances for critical
path ADE is (1.00 + 0.44 + 1.00) = 2.44.
2119
2
z

1.2
2.44 1.562 8
Assuming the normal distribution applies (which is questionable for a sample
of three activities), we use the table for the normal probability distribution.
Given z = 1.28, the probability that the project can be completed in 21 days is
0.8997, or about 90%.
c.

Because the normal distribution is symmetrical, the probability the project can
be completed in 17 days is (1 0. 8997) = 0. 1003, or about 10%.

Project Management

9. z

CHAPTER 3

35

T TE
2

Where T = 20 weeks, TE = (5.5 + 9.0 + 4.5) = 19 weeks, and the sum of the variances
for critical path BFG is (0.69 + 2.78 + 0.69) = 4.16.
1
20 19
z

0.4903
4.16
2.0396
Assuming the normal distribution applies, we use the table for the normal probability
distribution. Given z = 0.49, the probability for activities BFG taking longer than
20 weeks is (1 0.6879), or 31.21%.
10. a.

The AON diagram is:

0 A
12
4 5
15

11

11

ES ID EF
LS DUR LF

Start

Finish

0
15 0

B
3

3
3

3
3

D
5

8
8

8
8

F
7
15

b. Critical path is BDF. Expected duration of the project is 15 weeks.

c. Activity slacks for the project are:
Start
Earliest
Latest
A
0
No B
0
Yes C
5
No D
3
Yes E
8
No F
8

Activity

Finish
Earliest
Latest
4
5
0
3
9
7
3
8
11
12
8
15
Yes

Total
Slack
9
3
11
8
15
15

Critical
Path?
4
0
4
0
3
0

36

PART 1

Using Operations to Compete

11. Bluebird University. Calculation of activity statistics (in days):

The AON diagram is:

A

Start

8.33

C
4

6.83

17.33

7.5
4

10

11.5

F
4

H
7

The critical path is ADGI, and the expected completion time is 43.17 days.
T = 47 days, TE = 43.17 days, and the sum of the variances for the critical activities is:
(0.25 + 5.44 + 0.69 + 2.25) = 8.63.
T TE 47 43.17 3.83
z

1.3
2
8.63
2.94 0

Assuming the normal distribution applies, we use the table for the normal probability
distribution. Given z = 1.30, the probability that activities ADGI can be completed in
47 days or less is 0.9032.

Project Management

CHAPTER 3

37

12.

ES ID EF
LS DUR LF

0
18 0

A
7

14

14

7
7

14 F
14 1

7 D
13
7 6

Start

0
18 0

Trial
0

Crash
Activity

A, G

C, G

B, H

H
3
18

13

13
13

Resulting
Critical
Path A
CFH A
DGI B
EGI A
CFH B
EGI A
CFH A
DFH B
EGI A
CFH A
DFH A
DGI
BEGI

15
15

Finish

B 12
12 12

12
13 12

15
15

G
3

16
16

16
16

I
2
18

E
1
13

Time
Reduction
(weeks)

Project
Duration
(weeks)
18

Crash
Cost
0

17

$400

16

$450

15

$600

Total crash costs = $1450

To use OM Explorer for this problem, you need to modify the input data a little. The
problem already gives the cost to crash per week for each activity. Since OM Explorer

assumes it must calculate these values, multiply the number of weeks the

38

PART 1

Using Operations to Compete

activity can be crashed by the cost per week given in the problem statement. The input sheet
and the resulting crash schedule should look like the exhibits below.

NOTE: For the Crash Costs Excel DID divide the entered per week $ by number of
allowable days. Thus it crashed B and A first, then kept crashing B. The Solver solution
does NOT match the (correct) manual solution

Project Management

13. a.

CHAPTER 3

39

The AON diagram is:

5
76

0 A
15
1 5
21

C
2
8

ES ID EF
LS DUR LF

13

19

8 E
13
8 5

Start

0
21 0

B
5

5
5

5
5

D
3

Finish
13

8
8

13
13

G 16
3 16

16
16

H
5
21

The critical path is BDEGH, and the project duration is 21 days.

b.

Direct cost and time data for the activities:

Activity
A
B
C
D
E
F
G
H

Crash Cost/Day
200
600
300
500
150
100
0
200

Maximum Crash
Time (days)
1
2
1
1
2
1
0
2

A summary of the cost analysis follows. The recommended completion date is

day 17 by crashing activity E by 2 days and activity H by 2 days.
Crash
Trial Activity
0

1
E
2
H

Resulting
Critical
Paths BD
EGH BD
EGH
BDEGH

ReducProject
tion
Duration
(days)
(days)

21
$7,500
2
19
2
17

Costs
Last
Trial

$7,500
$7,800

Crash
Cost
Added

$300
$400

Total
Indirect
Costs
$5,250
$4,750
$4,250

Total
Penalty
Costs
$700
$500
$300

Total
Project
Costs
$13,450
$13,050
$12,750

Further reductions will cost more than the savings in indirect costs and
penalties.
c.

The critical path is BDEGH for minimum cost schedule..

40

PART 1

Using Operations to Compete

14.
a.

b.

The critical path at the start is B-D-F at a duration of 18 weeks. We proceed

as follows: (1) Crash Activity B to its maximum reduction because it is the
cheapest activity on the critical path to crash per week and costs less than
$2,800, the sum of the indirect and penalty costs. The savings is $3,600. The
critical path is still B-D-F at a length of 16 weeks. (2) Reduce Activity D by 3
weeks for an additional savings of $2,400. The critical path is still B-D-F at a
duration of 13 weeks. No further reductions will lower total costs because the
cost to crash the other activities (that is, Activity F) exceeds the potential
reduction in indirect costs. Therefore, the minimum-cost schedule is 13
weeks.
The normal direct cost is $31,000, the normal indirect costs are $28,800,
the penalty costs are $7,200, and the total for the normal schedule is $67,000.
The cost for the schedule in part a is $31,000 + $8,000 (crash costs) + $20,800
(indirect costs) + $1200 (penalty) = $61,000. The total savings is $6,000.

15.
a.
b.

c.

The shortest project duration time would be 7 weeks, using the crash times.
Since the normal project time is 12 weeks, the total normal direct cost is
$56,000. There would also be indirect costs of $120,000 over the 12-week
period. The penalty cost would be $30,000 for the three weeks past week 9.
The grand total is $206,000.
The minimum-cost schedule would take 9 weeks. This can be found in the
following way: (1) the starting critical path is A-C-E-F at 12 weeks. Since
Activity A is the cheapest to crash per week, crash it one week for an
additional cost of $3000. The savings is $10,000 (indirect costs) + $10,000
(penalty costs) - $3,000 = $17,000. The project duration is now 11 weeks.
(2) Since Activity A cannot be crashed further, the next cheapest activity to
crash that is on the critical path is Activity F. Crash F for its maximum of two
weeks at an additional cost of $10,000. The savings would be $20,000
(indirect costs) + $20,000 (penalty costs) - $10,000 = $30,000.

The critical path is now 9 weeks in duration. Since the penalty costs are zero for
further reductions, there are no other options to reduce the project time that are less
costly than the indirect costs per week. Therefore, we stop.

Project Management

16. Gumball Foods

a.
Calculation of the activity statistics:
Activity
A
B
C
D
E
F
G
H

Expected Time
4
8
10
2
5
4
1
2

Variance
0.44
1.00
2.77
0.11
2.77
0.00
0.00
0.00

The AON diagram for the hiring project is:

0 A 4
77
4 11

Start

0 B
16
1 8
16

4
D 6
11 2 13
14

6
G
13 1

13

14

14

14

1.2
0

CHAPTER 3

41

Finish

C
EF 0

10
10 F
10 10
10

14
4 14

ES ID
LS
DUR LF

The critical path is CFH and the project is expected to take 16 weeks.
b.

T TE

14 16
2.77

2
1.66

Using the normal distribution table, the probability that the project can be
completed in only 14 weeks is (1 0.8849) or 0.1151.
c.

No additional expenditures are recommended. Reducing activity A would not

help because it is not on the critical path. Reducing activity B would not
shorten the project by two weeks because it is also not on the critical path, and
even if it were, it would cost more than the lease costs for two weeks.

42

PART 1

Using Operations to Compete

17. An AON diagram using the Alternative 1 (or normal) times follows.
D
9

A
G 12
B

Start

13

E
8

F
8

12

H
2

Finish

18

The critical path is ADG, and the project duration is 29 days.

Direct cost and time data:
Crash Cost/Day
$600.00
112.50
750.00
250.00
225.00
350.00
200.00
200.00
900.00

Activity
A
B
C
D
E
F
G
H
I

Maximum Crash
Time (days)
1
4
2
4
2
1
2
1
2

Cost analysis for the project:

Trial
0

Crash
Activity

Resulting
Critical
Path A
DG

Time
Reduction
(weeks)

Project
Duration
(weeks)
29

Crash
Cost

ADG

27

400

ADG
AEH

26

250

D, H

ADG
AEH

25

450

The total cost for this project is:

$13,050 + $400 + $250 + $450 = $14,150.00
The activity times with crashing are:
A: 12
B: 13
C: 18
F: 8
G: 6
H: 1

D: 7
I: 4

E: 12

Project Management

18. Sculptures International

a.
The AON diagram for this project is:

0
70

Start

A
4

4
4

4
4

C
3
7

7
7

E
3

10
10

CHAPTER 3

43

Finish

19. Reliable Garage

a.
The AON diagram is:

12

17 17

5
22

Start

2
2

8
8

12

12

19

22

25

12

15

22

22

25

12

17

17

22 12

17

17

G
5
22

44

b.
c.

PART 1

Using Operations to Compete

Critical Path is ABCFGH, and the duration is 25 days.

Activity Slack

Activity
A
B
C
D
E
F
G
H

0
0
0
22 17 = 5
22 19 = 3
0
0
0

20. a.
The AON diagram for the hiring project is shown below.

b. The critical path is BCGHJK, and the expected project duration is 55 days.
21. a. Calculation of the activity statistics:

Project Management

CHAPTER 3

45

The AON diagram for the advertising campaign is shown below.

20 G 23
23 3 26

23

32.33

27
4

36.33

0 B
9 9
20

9
18

0 A 10
20
0 10 10

Start

C
2

9
18

10

D 11
2

20
31
20
31

26

26

26

26

31 J 36.33
31 5.33 36.33

31
34.33

Finish

K 33
2 36.33

10 10 20

8
8

10

The critical path is AEFHJ, the expected project duration is 36.33 days,
and the sum of the variances of the critical path activities is
(0.44 + 0.44 + 0.11 + 1.00 + 0.44) 2.43
z

T TE

1.67

1.0
2.43
1.56 7

The probability that the project will take more than 38 days is
1 0.8577 or 0.1423

c.

The path AEGHJ has a duration of 33.33 weeks with variance of 2.76.
T TE 36.33 33.33
Therefore, z 2
1.81
2. 76

38 36.33

b.

The probability that the path AEGHJ exceeds 36.33 weeks is 1 0.9649,
or 0.0351.

46

PART 1

Using Operations to Compete

22. Michaelson Construction. One of many possible arrangements for the project activities
is shown below:

K
U
Window

N
Outside
Printing

Q
Siding

P
Roof
H
HVAC

T
Doors
I
Insulation
M
Rough-in
Plumbing

E
Electrical
Wiring

B
F
G
Building Foundation Framing
Permit

D
Dry
Wall

O
Interior
Painting

V
Bath
Fixtures
W
Lawn
Sprinkler

J
Kitchen
Cabinets
C
Carpets and
Flooring

R
Final
Trim

A
Appliance
Installation

X
Landscaping
S
Sidewalks
K
Lighting
Fixtures

L
Moving-in

Project Management

CHAPTER 3

23. Will, Bea Wright-Bach Wedding One of many possible arrangements for the project
activities is shown.

CC

planning

O
Y

D2
wedding party

Blood

License

47

48

23. a.

PART 1

Using Operations to Compete

AON diagram

F
4

A
3
3

Start

B
4

C
2

K
6

4
H

L
I

P
M

Finish

J
4

Activity slacks for the project:

Results
Solver - Project Budgeting
Project time

Early
Activity Start
A
2B
0C
2D
0E
3F
0G
2H
6I
6J
1K
0L
6M
1N
0O
4P

25

Early
Finish
0
0
3
4
4
9
5
9
7
9
13
11
13
16
15
20

Project Budget

Late
Start
3
4
5
9
7
13
11
11
8
13
16
14
15
20
16
25

Late
Finish
2
0
5
4
7
9
7
15
13
10
13
17
14
16
19
20

$2,125
Total
Activity
Slack
5
4
7
9
10
13
13
17
14
14
16
20
16
20
20
25
0

The critical path is BDFKNP, and the expected completion time is 25 days.

Project Management

CHAPTER 3

49

b. Project cost with the earliest start time for each activity:
Results
Solver - Project Budgeting

Project time

Period Total

25

70.83 33.33 37.50

70.83 33.33 37.50

Project
Budget

2,125

70.83 33.33 37.50

100.00

37.50 62.50

147.50

62.50

35.00

50.00

12.50

97.50

35.00

50.00

12.50

97.50

35.00

50.00

12.50

147.50

35.00

47.50

35.00

10

106.25

50.00 12.50 25.00

18.75

11

106.25

50.00 12.50 25.00

18.75

12

118.75

50.00

18.75

13

118.75

50.00

14

150.00

15

100.00

16

250.00

17

43.75

18

43.75

19

43.75

20

43.75

21

30.00

22

30.00

23

30.00

24

30.00

25

30.00

100.00

12.50

50.0
0
50.0
18.75
0
50.0 50.0 50.0
0
0
0
50.0
50.0
0
0
50.0
0

200.0
0
43.7
5
43.7
5
43.7
5
43.7
5
30.0
0
30.0
0
30.0
0
30.0
0
30.0
0

50

PART 1

Operations to Compete

Project cost with the latest start times for each activity:
Results
Solver - Project Budgeting
Project time

Period Total

25

Project Budget $

2,125

37.50

37.50

37.50

37.50

70.83 33.33 37.50

70.83 33.33 37.50

68.33 33.33

97.50

62.50

97.50

35.00 62.50

50.00

97.50

35.00 35.00

12.50 50.00

35.00

35.00

97.50

10

112.50

12.50 50.00 12.50

18.75

11

81.25

50.00 12.50

18.75

12

81.25

50.00 12.50

13

81.25

100.00 18.75 50.00

14

168.75

50.00

50.00

15

100.00

16

125.00

25.00

50.00

50.00

17

68.75

25.00

18

93.75

50.00

19

93.75

50.00

43.75

20

293.75

50.00

43.75 200.00

21

30.00

30.00

22

30.00

30.00

23

30.00

30.00

24

30.00

30.00

25

30.00

30.00

12.50 50.00

50.00

18.75

43.75
43.75

Using

Project Management

CHAPTER 3

51

Cost by day is plotted for Early Start and Late Start Schedules.

OM Explorer
Solver - Project Budgeting

Cost by Period
350
300

Cost

250
200
150
100
50
0
1

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Period
Early Start

Late start

These two plots indicate the patterns of cash flow associated with the two different
project schedules. Management can select the schedule that fits better with its financial
status. Notice that the latest start dates delay cash flow requirements to the later time
periods of the project.

CASE: THE PERT STUDEBAKER *

A. Synopsis
The owner of the Roberts Auto Sales and Service Company is interested in restoring a
1963 Studebaker Avanti for advertising a new restoration business she wants to start. The
restoration project involves 22 activities and needs to be completed in 45 days so that the
car can be displayed in an auto show. The owner wants an assessment of how the
restoration business fits with the other businesses the company engages in, a report on the
activities that need to be completed and their interrelationships, an assessment of whether
the project can be completed on time, and a budget.
B. Purpose
This case provides enough data for the student to develop a PERT/CPM network for a
project involving 22 activities. With this case, the class can:
*

This case was prepared by Dr. Sue Perrott Siferd, Arizona State University, as a basis for classroom
discussion.

52

PART 1

Using Operations to Compete

Discuss how well a new market segment can be satisfied with an existing operation.
Gain experience in identifying the relationships between activities in a large project.
Relate cost to the development of a project.

C. Analysis
1. The restoration business, although entailing much of the skills and resources needed
for the other market segments the company serves, needs to be evaluated carefully
before making a commitment. Currently, the company has three car dealerships, two
auto parts stores, one body/paint shop, and one auto storage yard. These operations
would be useful for the restoration business. However, the nature of the markets
served by these operations is not made explicit in the case. Some questions come to
mind:
a. Are the auto parts stores equipped to provide customers with one-of-a-kind
parts? Restoration parts are hard to find and require access and familiarity with
different information systems.
b. Does the body/paint shop have the ability to do custom, high-quality work, with
restoration of rusty parts, or is it a high-volume operation with minimal capability
to restore any car to its original condition?
c. Does the machine shop have the capability to machine one part at a time to unique
specifications if the restoration part cannot be purchased from a supplier?
d. How useful will the salvage yard be for the restoration business? There must be a
broad mix of vintage age autos in the yard in order to support the new business.
The competitive priorities for the restoration business most likely will be highperformance quality and customization in a low-volume environment. It would seem
that these competitive priorities could conflict with other market segments the
company serves.
2. The project activities and the precedence relationships are given in TN.1.
3. A PERT/CPM diagram is shown in TN.2. The latest finish data are set for 45 days
from present, which would be the day before the car must be in the show. The critical
path is ABTV, and the expected project duration is 41 days. The slack of each
event along the critical path is 4 days, suggesting no problem in completing the
project on time.
4. A project budget is shown in TN.3.
5. A cash-flow report is shown in TN.4. It is aggregated by weekly time periods. If an
activity is scheduled to start in the middle of a week, the total cost is prorated for that
week and following weeks. If MS Project is used for this analysis, the calendar date
the students use for the start of the project may affect the weeks in which
certain
costs may accrue. Also, MS Project assumes a five-day workweek as a default. From
TN.4 it appears that there is a cash flow problem in week 4 because the cash required
exceeds $1,700. To resolve the problem Activity S, paint car, could be scheduled to

Project Management

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53

start later so that it is completed the following week, thereby pushing some cost to week
D. Recommendations
The owner should:
1. Carefully evaluate the potential conflicts of competitive priorities for the new
restoration business.
2. Monitor the critical path of ABTV, although there is slack.
3. Monitor the budget even though there is ample room for unexpected contingencies.
E. Teaching Suggestions
This case should be an overnight assignment so that the students have the opportunity to
think through the construction of the PERT/CPM diagram. This is not a difficult
assignment, even though there are 22 activities. If used for discussion in class, it should
be discussed after the PERT/CPM approach has been addressed in a previous class.
Alternatively, the case could be used as a written assignment with no debriefing during
class.
The discussion should begin with the potential conflicts with competitive priorities so
that the class understands the strategic implications of the new restoration business.
There is not enough information in the case to make a definitive conclusion, so the
emphasis should be on the potential for conflicts and the need to do some serious
exploration.
The discussion can then turn to the network diagram and the conclusions. See
Exhibits TN.2 and TN.3 for suggestions.
F. Board Plan
Unique Tasks for Restoration Business Competitive Priorities
Find parts no longer made
High-performance design
Manufacture unique parts
Customization
Low volumes
Custom body work
Custom paint work
New information system

54

PART 1

Using Operations to Compete

EXHIBIT TN.1

Table of Tasks

Task
A Order all needed material and parts
B Receive upholstery material
C Receive windshield
D Receive carburetor and oil pump
E Remove chrome from body
F Remove body from frame
G Get fenders repaired
H Repair the doors, trunk, and hood
I Pull engine from chassis
J Remove rust from frame
K Have valves reground in engine
L Replace carburetor and oil pump
M Get the chrome parts rechromed
N Reinstall engine
O Put doors, hood, and trunk back on frame
P Get transmission rebuilt and replace brake
Q Replace windshield
R Put fenders back on
S Get car painted
T Reupholster interior of car
U Put chrome back on
V Pull car to Studebaker show in Springfield, Missouri

Time
2 days

1 day
1 day
4 days
6 days
1 day
3 days
5 days
1 day
3 days
1 day
1 day
4 days
1 day
1 day
4 days
7 days
1 day
2 days

Immediate
Predecessors
None
30 days
A 10 days
A 7 days
A
None
E
F
F
F
I
I
D, I
E
K, L
H, J
N, O
C
G, P
Q, R
B, S
M, S
T, U

Project Management

2
9

D
25

EXHIBIT TN.3

26

Project Budget for The PERT Studebaker

Task
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
Total Cost

Estimated Cost
$100
250
130
180
50
150
200
300
50
300
500
50
150
150
80
700
70
60
1,700
1,200
50
500
$6,920

CHAPTER 3

55

56

PART 1

Using Operations to Compete

EXHIBIT TN.4

Cash Flow Report for The Pert Studebaker

1

Total

Start
A

Order needed material and parts

Receive upholstery material for seat

covers

$25.00

Receive windshield

Receive carburetor and oil pump

Remove chrome from body

$50.00

$50.00

Remove body from frame

$150.00

$150.00

Fenders repaired by body shop

$150.00

$50.00

$200.00

Repair doors, trunk, hood

$150.00

$150.00

$300.00

Pull engine from chassis

$50.00

Remove rust from frame

$200.00

$100.00

$300.00

Regrind engine valves

$200.00

$300.00

$500.00

Replace carburetor and oil pump

M Rechrome the chrome parts

N

Reinstall engine

Put doors, hood, and trunk on frame

Rebuild transmission and replace brakes

Replace windshield

Put fenders back on

Paint car

Reupholster interior

Put chrome back on

Pull car to Studebaker show

$100.00

$100.00
$41.67

$41.67

$39.00

$65.00

$26.00

$77.14

$102.86

$41.67

$41.67

$41.67

$16.67

$250.02
$130.00
$180.00

$50.00

$50.00

$50.00

$150.00

$150.00
$150.00

$150.00

$80.00

$80.00
$700.00

$700.00

$70.00

$70.00
$60.00

$60.00

$1,700.00

$1,700.00
$514.29

$685.71

$1,200.00

$50.00

$50.00
$250.00

$250.00

$500.00

$935.71

$250.00

$6,920.02

Finish
Total

$1,341.14

$939.53

$987.67

$1,801.67

$91.67

$41.67

$530.96