Operations Management Essay

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Cost to crash- manager must know the following to determine if there is a benefit of crashing (expediting) a project 1. Normal time (NT)- Time necessary to complete an activity under normal conditions 2. Normal Cost(NC)- the activity cost associated with the normal time 3. Crash time(CT)-the shortest possible time to complete an activity 4. Crash Cost(CC)- the activity cost associated with crash time. Cost analysis based on assumption that direct cost(labor materials and other cost related to activites) increase linearly as the activity time is reduced from its normal time- implies every week the activity time is reduced the direct cost increases by a proportional amount. (figure 2.6) pg 61 Cost to crash per period= (cc-nc)/(nt-ct) –table 2.1 pg 61 example Minimizing cost- objective of cost analysis is to determine the project schedule that minimizes total project costs- Project managers are most interested in minimizing the costs of their projects so that the budgets are not exceeded. Minimum cost schedule- a schedule determined by starting with the normal time scheduled and crash activities along the critical path in such a way that the costs of crashing do not exceed the savings indirect and penalty costs. Step to determine this are 1- determine the projects critical path 2. Find the activity or activities on the critical path with the lowest cost of crashing per week. 3 reduce to time for this activity until – it cannot be further reduced and b another path becomes critical and c. The increase in direct cost exceeds the indirect and penalty cost savings that result from shortening the project. If more than one path is critical the time for an activity on each path must be reduced at the same time. 4 repeat this procedure until the increase in direct costs is larger than the savings generated by shortening the project. -Assessing Risks Risk- is

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