Minimum Cost Scheduling

The basic assumption in minimum cost scheduling is a relationship between activity completion time and the cost of a project. On one hand, it costs money to speed up the activity; on the other, it costs money to sustain the project. The costs are associated with the activities which are termed to direct costs, and add to the project direct cost. It is relevant to the worker’s overtime and hiring more workers from other jobs; others are resource related, such as buying additional or more efficient equipment and drawing depending upon the additional facilities.

The costs are associated with sustaining the project are termed with the project indirect costs; overhead, facilities, and resource opportunity costs, and, under certain contractual situations, penalty costs or lost incentive payments. The direct cost and project indirect costs are opposing costs which depend on time, the scheduling problem is essential for finding the project duration that minimizes their sum or finding the optimum point in a time-cost.

Procedure of minimum cost scheduling:

The procedure for finding minimum cost scheduling consists of five steps.  The first step is to prepare a CPM-type network diagram which calculates the normal cost and normal time. The normal cost is the lowest expected activity costs. The normal time associated with the normal cost. The second one is determining the cost as per unit of time to expedite the each activity. This assumption is common in practice and helps us to derive the cost per day to expedite the value may be found directly by taking the slope of the line using slope formula.  The third one is computing the critical path. The fourth is to shorten the critical path at the least cost.

Finally, the cost of applying critical path methods to a project is sometimes used as a basis for criticism. However, the cost of applying critical path techniques rarely exceeds the percent of total project cost.  The added features of a work breakdown structure and various reports are more expensive but rarely exceed the percentage of total project costs. Thus, added cost is generally outweighed by the savings from improved scheduling and reduced project time.

Additional Considerations:

There are other considerations which besides project cost. For example, when the project is a part of development of a new product, it may be extremely important and beneficial to accelerate the project to a point where the cost is greater than the minimum cost scheduling.  There are incentive payments which is associated with early and late completion time by simulating as indirect costs.

Questions:

• Explain about minimum cost scheduling.
• What are the steps involved in minimum cost scheduling?