Critical Path Analysis is a project management tool that...
- Sets out all the individual activities that make up a larger project.
- Shows the order in which activities have to be undertaken.
- Shows which activities can only taken place once other activities have been completed.
- Shows which activities can be undertaken simultaneously, thereby reducing the overall time taken to complete the whole project.
- Shows when certain resources will be needed - for example, a solicitor to be appointed for conveyancing.
- Many of the operations carried out by businesses are made up of a number of tasks (i.e. a network), and the operation is only complete when all of the tasks have taken place.
- Each task will take a certain amount of time (e.g. 62 days), and certain networks can be complex with many tasks involved.
- However, in the network for SLSL some of the tasks can be carried out at the same time. For example, when conveyancing (task H) is able to take place, SLSL is also able to begin sorting out the finance (task G) and the surveys (task J.) This reduces the time it takes to complete the operation.
Figure 1 in the SLSL case study shows a representation in the form of a network diagram (in days) of a typical sale...
There are certain features to note about the network:
- Arrows and lines show the tasks or activities to be carried out to complete the project. (e.g. Task E involves allowing a "viewing" period for potential buyers.)
- Some tasks can be carried out at the same time. (e.g. Tasks G, H and J can take place together, but only after task F has been completed.)
- Arrows and lines cannot cross
- Each task takes a certain amount of time (e.g. SLSL plans to take 10 days completing task F "Offer/Acceptance.")
- Tasks must be completed in a certain order. Certain tasks are dependent on others being completed. (e.g. Task B and Task C cannot begin, until Task A has taken place.)
A network diagram consists of nodes...
- The circles on the diagram called "nodes", indicate the end of one task and the start of the next task. (e.g. Task E - viewing, starts at node 3 and ends at node 5.)
- Arrows are used to represent the tasks themselves. For example, Node 3 indicates the start of task E - "Viewing." The arrow connecting it to Node 5 indicates the duration of this task. Then, Node 5 indicates the end of Task E and the start of Task F.
- There is always a node at the start and end of the project.
- Nodes contain information about the timing involved in the project.
The first stage in determining the critical path is to calculate the Earliest Start Time (EST) at which each of the tasks can start...
- These are the earliest times that each task can begin after the last critical task has been completed.
- These are shown in the top right section within each of the nodes. Which indicates the EST of the next task. (e.g. Node 5 indicates the EST of "Offer/Acceptance.")
- The first node will always have an EST of zero, as the first task can begin immediately.
- ESTs are calculated from left to right, by adding the duration of an activity to the EST of a previous node.
- If more than one figure leads to a node, the highest figure becomes the new EST.
The next step involves calculating the Latest Finish Time (LFT) at which each of the tasks can finish...
- These are the latest times that each task can finish without causing the entire project to be delayed.
- These are shown in the bottom right section within each of the nodes. Which indicates the LFT of the previous task. (e.g. Node 5 indicates the LFT of "Viewing.")
- The first node will always have an LFT of zero, as no tasks have began yet (and therefore don't need to be finished.)
- The last node of the project will always have an LFT which is equal to the EST.
- LFTs are calculated from right to left, by subtracting the duration of the previous task from the LFT at the current node.
- For activites which can be done at the same time as others, the LFT should be equal to the latest possible node on the critical path. For example, On the Figure 1 diagram nodes 7, 8 and 10 all have the same LFT as node 9 which is the latest critical activity they can be completed by.
Identifying the critical path...
- Once the Earliest Start Times (ESTs) and the Latest Finish Times (LFTs) have been calculated, it is now possible to identify the critical path through the network.
- The critical path allows a business to identify the sequence or "path" of tasks which are critical to the project. Any delay of an activity on the critical path directly impacts the planned project completion date, causing it to take longer to finish the project.
- The critical path determines the shortest time possible in which the project can be completed.
- The critical path on any network should include nodes where all Earliest Start Times and the Latest Finish Times are the same.
- It must also be the route through all of the nodes which takes the longest amount of time
Calculating the float...
- A business can use the information in the network to calculate the float time in the project. This is the amount of time by which a task can be delayed without causing the project to be delayed.
- The total float is the amount of time by which a task can be delayed without affecting the project.
- Activities which lie on the critical path will always have a zero total float value.
An example of total float...
- For Task D in figure 1, the total float time would be 115 days.
- This is calculated as: 135 (LFT) - 3 (EST) - 17 (duration) = 115.
- The free float is the amount of time by which a task can be delayed without affecting the next task.
- According to the diagram in figure 1, none of tasks currently have any "free float" time.
An example of free float...
- For Task D in figure 1, the free float time would be 0 days.
- This is calculated as: 20 (EST for next task) - 3 (EST for current task) - 17 (Duration.)
Critical path analysis can have a number of benefits for a business...
- Decision Making
- Time Based Management
- Working Capital Control
- The network shows tasks which can be completed at the same time, this can therefore help reduce the time it takes when selling a house and the use of resources.
- Highlighting exactly which delays are crucial to the timing of the project can help a business to meet deadlines. Inability to meet deadlines can be costly for business.
- House sales may be lost if they cannot be completed on time as buyers or vendors may become impatient, which is already a problem for SLSL due to many offers being withdrawn during 2011.
- Identifying tasks which can be delayed, without affecting the entire project, can help project management. As it allows staff to focus on the "critical" tasks, before sorting out ones which can be completed at a later date.
- Focusing staff on the "critical" tasks could also reduce the amount of time they take to complete, speeding up the entire project. This is likely to improve the firm's reputation, reduce the amount of offers withdrawn and increase sales.
- The use of business models such as critical path analysis is argued to be a more scientific and objective method of making decisions.
- It is suggested that estimating the length of time a project will take, based on past information and an analysis of the tasks involved, should lead to deadlines being met more effectively. As this implications of delays can be assessed, identified and prevented.
Working Capital Control...
- Identifying when resources will be required in projects can help a business manage its working capital cycle. Networks allow a business to identify exactly when something needs to be used in a project. In terms of SLSL this may be a solicitor for the conveyancing, who could be hired exactly after Task F has finished. This would prevent SLSL from wasting money hiring one when they aren't needed.
- If delays are identified and taken into account then resources can be allocated to other operations until they are needed. In terms of SLSL this is likely to be staff, who may be appointed to the "critical" tasks of the project before focusing on ones which can be completed at a later date.
Disadvantages of critical path analysis...
- Despite providing a network which outlines the time it takes to complete each task, there is no guarantee that each "critical" task will be completed without delay.
- Information used to estimate times in the network may be incorrect, as estimates are likely to be based on past performance and the project could have special requirements which could take longer.
- Changes sometimes take place when projects are carried out. For example, the solicitor used for conveyancing may become ill, and thus a new one may need to be appointed causing the task to become longer. Therefore, these factors should be considered when determining a duration for each task.
- The duration of some tasks could be subjective. For example the duration for Task E - Viewing, could vary considerably for each house. Some houses could sell in the first week, some could take all year to sell.
- Skilled management and committed staff are essential. The network diagram is only useful if SLSL can rely on its staff to adhere to deadlines and ensure that each project is completed as efficiently as possible.
- Certain tasks are outside SLSL's control (Energy performance certificate, finance, conveyancing, surveys etc.), which therefore makes it less likely for the information used to estimate the times of these tasks to be reliable, as external businesses are unlikely to be aware of the network.