Time Cost Trade Offs:

In network scheduling models, managers frequently want to reduce critical path time, even if it costs extra money to make the reduction. The two network methods explained above can be utilized to reduce critical path time. The process of decreasing the duration of a projector activity is commonly called crashing. There is value in crashing project. In order to crash a project, we should crash one or more activities. Crashing activity costs money. Deciding to crash an activity requires us to compare the cost of crashing that activity with the value of the resulting drop in project length. This decision is frequently complicated by the fact that some negotiation can be required between the party that incurs the cost of crashing the activity (e.g., the contractor) and the party that enjoys the value of the crashed project (e.g., the customer).

An activity is typically crashed by applying more labour to it (e g., overtime or a second shift). We might typically expect that using second-shift labour could cost 1.5 times as much per hour as first-shift labour. We might expect third-shift labour to cost twice as much as first-shift labour. Consider an activity that can be done in six days if only first-shift labour is used and has a labour cost of $6,000. If we allow the use of second-shift labour and thus work two shifts per day, the activity may be done in three days for a cost of 3 * 1000 + 3 * l000 * 1.5 = 7,500. If third-shift labour is allowed, then the project can be done in two days by working three shifts per day and incurring a total of : 2 * 1000 + 2 * 1000 * 1.5 + 2 * 1000 * 2 = $ 9,000.

The fundamental assumption in minimum-cost scheduling is that there is a relationship between activity completion time and the cost of a project. On one hand, it expense money to expedite an activity; on the other, this costs money to sustain (or lengthen) the project. The costs associated along with expediting activities are termed activity direct costs and add to the project direct cost. Some can be worker-associated, such as overtime work, hiring more workers, and transferring employees from other jobs; others are resource-associated, such as buying or leasing additional or more efficient equipment and drawing on additional support facilities.

The costs connected with sustaining the project are termed project indirect costs: Overhead, facilities, and penalty costs, resource opportunity costs, or lost incentive payments. The goal of any scheduling problem is fundamentally to find the project duration that minimises sum of direct costs and indirect cost or in other words, finding the optimum point in a time-cost trade-off.