Using CPM network charts, you can manage very complex projects. However, constructing the chart itself could prove a little complex. The effort will prove worthwhile, however, by reducing the complexity of managing the project, a much bigger task.
This page comes under the section Small Business Management.
In this article, we take a look at how you construct a CPM network chart. Actually, you use software tools these day to construct your CPM network charts. Even in that case, an understanding of the basics of CPM network chart construction could prove invaluable.
CPM network chart construction can help project managers to:
CPM network charts and CPM analyses are used for one off projects rather than repetitive operations.
While helpful, CPM network chart construction is a complex exercise. However, even if you don't plan to master this technique, a familiarity with it could help you focus on the right issues in managing projects, including your small business startup project. We will look at the technique in simple steps.
CPM stands for Critical Path Method. In CPM, a path is a series of activities that must be done in sequence. A typical project of some size would involve numerous activities.
A path consists of the second type of activities mentioned above. And the Critical Path is that path which takes longest to complete. It is this path that determines the project completion time. If the time taken to complete the activities on the Critical Path can be reduced, the project can be completed earlier.
Let us first take a brief look at the role of charts in project management
Project management charts basically seek to show the activities and times in easy-to-comprehend graphic form. Typically, lines are used to represent activities.
Sequence is indicated by starting an activity line after the end of the lines for preceding activities. Simple Gantt charts use separate lines for each activity. In Gantt charts, the lengths of the lines are scaled to activity time estimates.
In CPM charts, the practice is a little different, as we discuss in the next section.
The charts make it easy to see at one glance all the activities involved in a project (or sections of projects if they are too complex to be represented in a single chart).
A CPM chart would look like the following:
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Unlike Gantt charts, the lines are not scaled to time taken. Instead, the lines have lengths that make it convenient to draw a network indicating interrelationships among activities. Sequential activities are drawn one after another, connected by nodes (numbered circles). Parallel lines represent activities that could be executed independently.
The nodes represent start/finish points of activities. The values above each node indicate earliest and latest completion times. In the diagram, Te is the earliest completion time in weeks. Tl is the latest completion time. S indicates any slack, i.e., the gap between earliest and latest completion times. On the critical path, slack would be zero for all activities. Each activity must commence immediately upon completion of the preceding activity.
The lines are labeled to indicate what activity each represents. For example, the line labeled GQ could mean Get Quotes. The number below that label, 2, indicates the time taken by that activity (in weeks). The Te times for each node are obtained by adding the times for all preceding activities on that path.
Lines can also be identified by the numbers of the start and finish nodes for each line. Thus the activity labeled GQ can also be identified as 'Activity 2-4' in the sample chart. In fact, this is the formal method for identifying activities.
The Critical Path is highlighted by drawing the lines on the path in bold. The total of the times for activities on this path is the time needed to complete the project. In the example chart, this time is 13 weeks, as indicated by the Te of the final node numbered 10.
The latest completion times, Tl, indicate the latest time (in weeks) by which the activity should be completed. If the activity exceeds this time, project completion would be delayed. These times are computed by working back from project completion time - 13 weeks in our example. From this total time, deduct the time estimates for activities on the path BACK to a particular node to get that node's Tl.
As you could note, Te and Tl are the same on the Critical Path. It is on the non-critical paths that the two times differ. And the difference is the slack, S.
Non-critical paths consist of activities that could be done independently of the activities on the Critical Path. They take less time in total compared to the critical path time. Hence, even if an activity on this path is slightly delayed, it might not affect project completion.
The key element of the network is the activity. Hence the first task of chart construction is to identify all the activities involved in a project.
An activity means a series of related tasks that go into achieving an easily identifiable result. For example, the activity of Getting Quotes could be defined as complete when quotations have been received from a certain number of suppliers.
The usual approach to identifying activities is to construct a hierarchical chart. This chart looks like an organization chart, with a number of levels. At the top level would be the overall task of completing the project. An example would be the installation and commissioning of certain machineries.
At the next level we would show the major activities involved in this overall task. The machinery installation example might involve the following sub activities:
Where necessary, these second level activities could be supported by a third level of sub-activities. And the third level could be supported by a fourth level, and so on. The objective would be to arrive at small units of easily managed activities. It would be easy to estimate the resource and time requirements for such small units.
The next CPM network chart construction step would be identifying the sequence of the activities involved. Some of the activities could be carried out simultaneously. Others might be dependent on each other. In our activity list above, the machinery procurement and site arrangement activities could proceed independently, under the charge of different specialists.
The sequencing would be carried to the lowest level of our hierarchical activity chart. And separate CPM charts would be constructed where necessary to handle complexity. There would be a summary chart to show the overall picture and this summary would refer to relevant sub-charts at appropriate places.
CPM methodology has certain accepted conventions for indicating links between different charts. Going into the details of these would be beyond the scope of this short article. If you want to master CPM, you should get a detailed text book or attend a training course.
We would touch upon one convention - the use of 'dummy' activity lines. These lines do not represent any real activity requiring resources or time. Instead, they are used to show dependencies not shown otherwise.
In our example chart, there are two paths - one for machinery and the other for premises. These proceed independently. However, at a certain stage, dependencies arise. Activity 6-9 involves receiving the equipment at site. Before we can go to the next machinery-related Activity 9-10, installation of equipment, we have to ensure that the premises-related Activity 7-8, site preparation, is complete. We show this dependency by drawing a line for the dummy Activity 8-9. This dummy activity does not require any resources or time; it is drawn only to show the dependency.
The exercise of CPM network chart construction does not end with this first chart. The value of CPM analysis is that it allows us to reduce project times and costs in a systematic manner.
So far, we have been discussing activity time estimates as if these were fixed. These are not. If you allocate more resources to an activity, you could speed it up in most cases. However, allocating more resources would also mean more costs.
It is in this situation that the CPM network chart comes to our help. As we saw above, the network shows critical and non-critical paths. Activities on the latter paths have slack times, i.e. the overall project would not suffer if these activities are delayed a little. Resources from these activities could be transferred to those on the critical path, reducing the overall time.
So we re-estimate the times for the transferor and transferee activities and construct a new CPM network chart. We might now find that the old Critical Path has now become non-critical while another path has become critical. The resource reallocation exercise is repeated to reduce the time of the new critical path activities.
Ideally, one should finally arrive at a situation where all paths are critical i.e. there is no scope for further transfer of resources. This is the minimum time that can be achieved with the existing resources (and costs).
Even at this stage, the CPM network chart construction exercise is not complete. There might be situations where savings can be achieved by further reduction in project completion times. For example:
In situations like the above, we might find that it might be worthwhile to speed up the project even if it means incurring additional costs. The criterion would be whether the additional costs would be less than the costs of delayed completion.
In CPM terminology, we 'crash' the times of critical activities by introducing new resources (like manpower, machinery or overtime working) into the project. To examine the possibilities, we prepare a table like the following:
| Activity | Time Now | New Time | Crash Cost | Crash Cost/week |
| LS | 3 | 2 | 150 | 150 |
| GQ | 2 | 1.5 | 200 | 400 |
| SS&N | 2 | 1.5 | 250 | 500 |
| RE | 3 | 2 | 200 | 200 |
| IE | 3 | 2 | 300 | 300 |
For each activity, the time estimated now, the time after crashing and the cost of crashing are estimated. Next, a computation is made to determine the crashing cost per week for each activity.
It makes sense to crash those activities first which cost least per week to crash. Thus we would crash LS first, RE next, and so on. After each crashing, the CPM network chart construction is repeated. The focus would shift to the new Critical Path, if it has changed.
At some stage, it might be found that the crashing cost is higher than the corresponding benefit. For example, if the penalty for a week of delay is 350, it would not be worthwhile to crash activities GQ and SS&N which cost 400 and 500 per week to crash.
There is also the fact that additional resources can be infused only to a certain limit. If too many people are put on a task, they might get in each other's way and actually delay its completion.
Even if you are not ready for a CPM network chart construction exercise, you could benefit by using its approach in your project.
You should definitely be able to achieve greater control over managing your small business start project.
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The book proceeds in a logical manner and enables the reader to select the appropriate stage relevant to their present knowledge of the technique ... (the author) has produced what I would call essential reading for those who see a need to improve their planning and control activities. It is recommended without reservation.
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