Consider the supply chain planning implementation project depicted in Figure 15S
ID: 359220 • Letter: C
Question
Consider the supply chain planning implementation project depicted in Figure 15S-1. Suppose that the client has offered a $4,100 bonus to us if we can complete the project seven working days early.
Crash Schedule for Planning System Installation Project
*Task is on the critical path
a. Based upon the crash cost information provided in the above table, would you accept the client's proposal?
b. By how many days (at most) could you profitably shorten the project?
Task Current Planned Duration Minimum
Duration Crash Cost per Day *Select System Modules 9 6 $ 1,300 Prepare Data 5 4 $ 200 *Set System Protocols 3 1 600 *Populate System Data 5 3 $ 800 Prepare Documentation 14 10 $ 300 Design Training Program 2 2 — Hold Training Sessions 1 1 — *Test System 6 3 $ 700 *Debug System 4 2 $ 1,000 *Pilot Test 3 2 $ 900 *Hold “Go Live” Meeting 1 1 —
Explanation / Answer
If project duration must reduce, then the activities on the critical path must be targeted.
The order of priority will be to choose first the one with the lowest Crash cost per day and crash it by maximum possible extent. After crashing it fully , choose the next one which has the second lowest crash cost per day and exhaust it fully and continue this process as much as possible.
Based on above logic, the sequence of choice and total crashing duration and crashing cost for that choice is listed below:
Activity on critical path
Crash cost per day, $
Reduction in duration
Total cost of cashing, $ ( = Crash cost / day X Reduction in duration)
Set system protocol
600
2
1200
Test system
700
3
2100
Popular system data
800
2
1600
Pilot test
900
1
900
Debug system
1000
2
2000
Select system module
1300
3
3900
Note, Reduction in duration = Current plant duration – Minimum Duration
Thus , first three items have to be chosen to reduce project duration by 7 days which will cost additional by = $1200 + $2100 + $1600 = $4900
Thus total cost of crashing by 7 days equalling $ 4900 > Bonus of $4100 offered by client ,
Therefore, it is not a profitable proposition and hence the offer of client must be rejected.
….. WOULD YOU ACCEPT CLIENT’S PROPOSAL ? ANSWER : NO
If the project has to be shortened profitably, it can so happen only if total cumulative cost of crashing is < $4900
That can happen at most by crashing first 2 activities namely “Set system protocol” and “Test System” with total cost of crashing being $1200 + $2100 = $3300. That would entail reduction in duration associated with these 2 activities = 2 + 3 = 5 days
WE CAN AT MOST PROFITABLY SHORTEN THE PROJECT BY 5 DAYS
Activity on critical path
Crash cost per day, $
Reduction in duration
Total cost of cashing, $ ( = Crash cost / day X Reduction in duration)
Set system protocol
600
2
1200
Test system
700
3
2100
Popular system data
800
2
1600
Pilot test
900
1
900
Debug system
1000
2
2000
Select system module
1300
3
3900