APPLYING MANAGEMENT SCIENCE MODELING TECHNIQUES

Managing Project with CPM Model

MANAGEMENT SCIENCEADB-MBA PROGRAM, BATCH 10

GROUP 3Erin Lumanta

Marjorie Anne O. JavillonarMinerva B. Abrera

Submitted to:Prof. Rene J. Aguila

Date Submitted:14 March 2011

I. Introduction

Management Science is very important in making the right business decision for different

situations in any organization. This paper will show how CPM is utilized in the planned reorga-

nization of the Controller’s Department (CTL) of the Asian Development Bank (ADB) that will

minimize disruption of its operations. Actual data was taken from the department which are pre-

sented and analyzed in this paper. The teachings from Prof. Rene Aguila and the techniques

gathered from the “Introduction to Management Science” book by Bernard Taylor III greatly

helped the ADB MBA-Batch 10 students in appreciating the importance of Management Science

not only in business operations but also in an individual’s decision making.

II. Controller’s Department

A. Background

CTL is supporting ADB’s operations in: (i) preparing financial reports; (ii) processing and

overseeing administrative and capital expense payments; (iii) processing and overseeing

loan/technical assistance/grant disbursements; (iv) working with the Regional Departments

(RDs) and Resident Mission (RM) offices to ensure optimal fiduciary control over project funds;

and (v) maintaining loan accounting and servicing. As of 31 December 2010, CTL has 166 staff

composing of 21 international staff, 31 national staff and 114 administrative staff organized in

different units and sections.

In February 2011, CTL planned to realign its organizational structure based on functional

responsibilities to achieve and promote (i) greater efficiencies and effectiveness, (ii) more

efficient use of staff resources, (iii) greater outsourcing opportunities, and (iv) greater delegation

of authority to empower staff.

B. Impact of Reorganization and Realignment in CTL

CTL will now be divided into two divisions, Accounting Division (CTAC) and Loan

Administration Division (CTLA), and one unit, Institutional Services Unit (CTIS) from the original

two divisions. Staff reassignment to different divisions or unit will require manpower, logistics,

systems restructuring, turnover of documents, and the physical transfer of staff to their

designated areas. The anticipated activities for the reorganization are projected to take 41 days

to complete. However, it is hoped that CTL be able to complete the activities in less than a

month in order to minimize disruption of operations.

C. CPM Model – Single Time Estimate

To plan CTL’s reorganization activities and timing, the critical path method (CPM) was

applied. A single estimate for activity time, precedence relationships, and activity-on-node

(AON) are incorporated in this model. It is also important to determine the critical path or the

longest path throughout the network to find out the minimum time in which the network can be

completed. The QM application was used to determine the results.

CTL’s reorganization consists of the following activities and the coresponding

precedence activities:

No. Activities Normal Time (in day/s) Precedence

1 Inventory of CTL staff 1

2 Identification of staff new assignments 5 1

3 Notification of other departments on CTL’s

reorganization

1 2

4 Turn-over of files 18 2

5 Office lay-out planning 5 2

6 System access request of affected staff 3 2

7 Physical movement 2 4

8 System access of affected staff in place 14 6, 7

9 Transfer completed 1 7

On the above activities, CPM with single time estimate was applied resulting to:

No. Activities Activity Time (in day/s)

Early Start

Early Finish

Late Start

Late Finish

Slack

Project 411* Inventory of CTL staff 1 0 1 0 1 0

2* Identification of staff new assignments

5 1 6 1 6 0

3 Notification of other departments on CTL’s reorganization

1 6 7 40 41 34

4* Turn-over of files 18 6 24 6 24 05 Office lay-out planning 5 6 11 19 24 136 System access request of affected

staff3 6 9 38 41 32

7* Physical movement 2 24 26 24 26 08* System access of affected staff in

place14 26 40 26 40 0

9* Transfer completed 1 40 41 40 41 0

*Critical path activities

Based from the above data, a precedence chart is also created to clearly illustrate how

each activities are related to other activities.

From the table and chart of CPM with single time, it can be concluded that activities 3, 5,

and 6 can be delayed by 34, 13 and 32 days, respectively. The reorganization will still be

completed after 41 days. However, if activities 1, 2, 4, 7, 8 and 9 are delayed, the

reorganization completion date will be extended which can affect the operations of CTL and

other departments supported by CTL.

D. CPM Model - Crashing

However, CTL management would like to shorten the activities of the reorganization to

minimize disruptions as much as possible both internally and externally.

Looking at the planned activities in the previous table, there are activities that can be

shortened, especially activities that are in the critical path, but would generally entail costs.

Costs to be incurred are mainly overtime charges for staff and contractors rendering staff time

during weekends. The previous table included weekends that are not utilized as the projections

are based on working days.

One activity that can be shortened is the turning over of files (activity 4). It can be

shortened to 14 days from 18 days if about 100 staff will render overtime on a weekend (either

Saturday or Sunday). The average cost for this is Php2,000 per staff. IT works on system

access (activity 8) can also be shortened to 10 days from 14 days if 5 contractual staff will

render overtime for two weekend days at a cost of Php1,000 per day per staff.

Using the CPM model of crashing and the above additional data, the activities are again

inputted in the QM application.

No. Events Normal Time

(in day/s)

Crash time

(in day/s)

Crash Cost Precedence

1Inventory of CTL staff

1

2 Identification of staff new assignments

5 1

3 Notification of other departments on CTL’s reorganization

1 2

4Turn-over of files

18 14 200,000 2

5Office lay-out planning

5 2

6 System access request of affected staff

3 2

7Physical movement

2 4, 5

8 System access of affected staff in place

14 10 10,000 6, 7

9Transfer completed

1 7, 8

The following are the results with crash cost and the crash schedule:

Events Normal

Time (in

day/s)

Crash

time (in

day/s)

Crash

Cost

Crash Cost

Paid

Crash by Crashing

Cost

Project 41 24

1Inventory of CTL staff

1 1

2 Identification of staff new assignments

5 5

3 Notification of other departments on CTL’s reorganization

1 0

4Turn-over of files

18 14 200,000 50,000 4 200,000

5Office lay-out planning

5 0

6 System access request of affected staff

3 0

7Physical movement

2 2

8 System access of affected staff in place

14 10 10,000 2,500 4 10,000

9Transfer completed

1 1

Total210,000

Based on the above, the reorganization activities can be shortened substantially from 41

days to 24 days if staff and contractors are allowed to work on overtime during weekends.

However, a cost of Php210,000 will be incurred if staff overtime pushes through. Considering

the volume of daily operations and the importance of the supporting function of CTL to the

operations of ADB, it is recommended that staff be allowed to render overtime to complete the

reorganization significantly earlier than initially projected so that efficient and effective service

will be maintained and disruption to operations will be minimized.