Zaverecna Prace

MENDELU UNIVERSITY IN BRNO
Faculty of Business and Economics

Departmetnt of Statistic and Operation Analysis
Project evaluation applying

the PERT and the Critical
Chain metods
Diploma Thesis
Diploma thesis supervisor:

Ing. Pavel Kolman
Bc. Anna Horkov
Acknowledgment:
I would like to express my thanks to Ing. Pavel Kolman for his professional guidance and consultations. I would also like to thanks to Ing. Arch. Ji Buek for
his suggestive advices and willingness to help.
I declare that I worked up my diploma thesis on my own using the sources adduced in the list of references.
In Brno, 24th of May 2011,
_________________
Bc.
Anna
Horkov
Abstract
Bc. Anna Horkov. Project evaluation applying the PERT and Critical Chain
method. Diploma thesis. Brno: MUAF, 2011.
This diploma thesis deals with time analysis and its application in practice. The
aim is to provide the time analysis of two diferent projects and draw results
from the analysis to help a company decide which project to choose. Two types
of methods were used: Program and Review technique (PERT) and Critical Chain Method.
Keywords
Critical Chain, MS Project, PERT, project management, time analysis
Abstrakt
Bc. Anna Horkov. Hodnocen projektu pomoc PERT a Critical Chain metod.
Diplomov prce. Brno: MZLU v Brn, 2011.
Tato diplomov prce se zabv asovou analzou a jej aplikac v praxi. Clem
prce je aplikovat asovou analzu na dva projekty z praxe. Z tchto analz vyvodit zvry, kter napomohou spolenosti vybrat si, kter ze dvou projekt realizovat. Jsou pouity dv metody asov analzy: Program and Review Technique (PERT) a Critical Chain matoda.
Klov slova
Critical Chain, MS Project, PERT, asov analza, projektov management
Content
1 Introduction and goals
11
1.1
Introduction ............................................................................................... 11
1.2
Goals ......................................................................................................... 11
Methodology
13
2.1
Critical Path Method (CPM)......................................................................... 13
2.2
Project Evaluation and Review Technique (PERT) ......................................... 16
2.3
Theory of constrains (TOC) ......................................................................... 19
2.4
Critical Chain.............................................................................................. 21
2.5
Microsoft Office Project ............................................................................. 30
2.5.1
View in MS Office Project ...................................................................... 31
2.5.2
PERT Analysis toolbar ...........................................................................35
2.5.3
CCPM+................................................................................................36
3 Projects Description
3.1
37
The concepts of the Company XY: .............................................................. 38
3.1.1
Concept A ........................................................................................... 38
3.1.2
Concept B............................................................................................ 38
3.1.3
Concept C............................................................................................ 38
3.1.4
Concept D ............................................................................................39
3.1.5
Concept E.............................................................................................39
3.1.6
Concept F.............................................................................................39
3.1.7
Concept G ........................................................................................... 40
3.1.8
Concept H ........................................................................................... 40
3.2
Project specification ....................................................................................42
3.2.1
3.2.2
3.3
Projec Town..........................................................................................42
Project Mall .....................................................................................43
Project scheduling .......................................................................................44
3.3.1
Tasks in Town project............................................................................45
3.3.2
4
Tasks in Mall project ............................................................................. 47
Calculation of the projects

4.1
50
Calculation of the project using the PERT method ........................................ 50
4.1.1
Project Town........................................................................................ 50
4.1.2
Project Mall ...........................................................................................51
4.2
Calculation of the project using the Critical Chain method.............................. 52
4.2.1
Project Town........................................................................................ 52
4.2.2
Project Mall .......................................................................................... 54
4.3
Comparison of outputs of PERT method and Critical Chain .......................... 56
4.3.1
Project Town.........................................................................................57
4.3.2
Project Mall ...........................................................................................57
Selection of the project
58
Conclusion
61
Bibliography
62
Annex
66
Annex
67
Annex
68
Annex
69
List of Pictures
Obr. 1
Picture: CPM Network diagram with Critical Path
16
Obr. 2
Picture : Beta distribution in PERT
17
Obr. 3
Picture: PERT Exampel
18
Obr. 4
Picture: Students Syndrom
24
Obr. 5
Picture : Probability of Task Duration Time
26
Obr. 6
Picture: Network diagram for example from Tab.1
29
Obr. 7
Picture: Critical Chain with Feeding and Project Buffer
30
Obr. 8
Picture: MS Project Chart
31
Obr. 9
Picture: MS Project Network diagram
32
Obr. 10
Obr. 11
Picture: MS Project List

Picture: MS Project Form
32
33
Obr. 12
Picture: MS Project Table
34
Obr. 13
Picture: MS Project Filter
34
Obr. 14
Picture: MS Project Group
35
Obr. 15
Picture: MS Project PERT Analysis toolbar
36
Obr. 16
Picture: MS Project CCPM+ toolbar
36
List of Tables
Tab. 1
Critical Chain example
28
Tab. 2
Critical Chain Median duration
29
Tab. 3
Critical Chain Feeding a Project buffer
30
Tab. 4
PERT analysis for project Town
50
Tab. 5
PERT analysis for project Mall
52
Tab. 6
Critical Chain calculation of Feeding Buffers for project Town
54
Tab. 7
Critical Chain calculation of Feeding Buffers for project Mall
56
Tab. 8
Comparison of outputs of PERT and Critical Chain
57
Project evaluation applying the PERT and the Critical Chain metods
11
1 Introduction and goals

1.1
Introduction
Project Management is probably the most important of all the skills which can give a
company a competitive advantage in markets. Scheduling and cost overruns on projects
are infamous. The solution to stop the overruns cannot be accomplished with simple
procedures, based solely on intuition and experience. Poor project management and implementation of the results can be in many cases very unfortunate and lead in many cases
to disastrous consequenses. The methodology of project management has changed radically in the past few years. While in the past project management only simplified the specification of each action in the project, today it is a combination of a huge amount of factors.
These factors effect the project and will even effect the implementation of the process within the company. New approaches in methodology and project management can save
considerable money and prevent potential problems in project implementation.
People, including the project managers, often do not realize that they manage many
projects without thinking about it further. The project is something that has a beginning
and an end and the predetermined target. Each of us can improve our chances of success
by transferring the focus and emphasis on how these projects are managed.
Projects can be tangible or intangible. Examples of the most complex projects could be
building a spaceship or Nuclear power plant. A less demanding project may be the
reconstruction of a living room. And the simplest projects are the ones we do not think
about or even consider a project, such as cooking dinner or organizing a school reunion.
1.2
Goals
Since the data drawn from the internal databases of the selected company is very sensitive,
the company does not wish to be named. The use of this data by any competition could
lead to fatal consequences. For the purpose of the diploma thesis is the company called
"the Company XY".
12
The aim of the Company XY, which will be presented in this thesis is to open a new
branch of one of its brands in the city of Brno. The first alternative is the opening of a
branch in the city center, the second alternative is the opening of a branch in the Olympia
Shopping Center, located on the outskirts of town. The company has already developed the
cost analysis of both options. The task of the thesis will be to examine the different
perspectives of the project specifications by time analysis.
Decision-making within the company through time analysis is not provided by any
instruments or other quantitative approaches. It is surprising that XY Company, which is
one of the largest apparel corporations in the world, is not using time analysis.
The aim of the thesis is to use two methods of network analysis, namely PERT analysis and
Critical Chain, to calculate the actual project in real practice. Compare the results of both
methods and the conclusion drawn from them, which would assist in an important
strategic choice between the two methods of network analysis.
13
Methodology
Of the numerous methods used in project management, the most common group of
methods are those of network analysis. This group of special analytical methods are used in
cases where it is necessary to analyze and optimize a network of interconnected and related
elements. They are, therefore, the application of project management, which are key
elements of project activities in the mutual time relation. Methods of network analysis
focus on calculating and optimizing the critical path between the elements. The basic
network analysis methods include: Critical Path Method (CPM), Critical Chain Method
(CCM), Program Evaluation and Review Technique (PERT), Graphical Evaluation and
Review Technique (GERT), Metra Potential Method (MPM).
There are a number of researchers, including Lechler, Tonen, Stohar (2005) or Leach
(2000), who have discussed the concepts underlying the Critical Path approach and the
Critical Chain approach at a conceptual level. All of them agree that the philosophy behind
these two approaches is remarkably different, resulting in a different mindset for managers
and a different set of management practices. This is the reason why the project in this thesis is solved by two relatively different methods of network analysis.
Both of the projects will be solved by following methods of network analysis:
Project Evaluation and Review Technique (PERT) and
Critical Chain method.
The following paragraph will describe not only how PERT and Critical Chain methods are
used in the analysis of the project, but also the methods of which PERT and Critical Chain
are based on. A short description of the program MS Project, which is used for solving the
projects will also be described.
2.1
Critical Path Method (CPM)
As shown by Janov, Kolman (2011, p.105) or Vaverka (2007), the CPM scheduling was
developed in 50s, to address the challenges of different global projects. CPM is one of the
basic methods of network analysis. Its aim is to determine the duration of a project, based
14
on the length of the critical path. The duration of the project's activities is known based on
the experience and knowledge gained from past projects. Durations are not statistically
proven. The method can determine both the critical and non-critical activities within the
project and also determine the reserves in the project for the non-critical activities.
The critical path is defined as the longest possible path from the starting point to the
ending point on a graph chart. Each project has at least one critical path. The date of
completion of the last task in the critical path is also the date of completion of the project.
Critical Path is part of all phases of the project's life cycle.
ubrt, Langrov (2003, p.71) has drawn two rules which are valid for critical path:
The acceleration of work on the task that lies at the critical path reduces the
duration of the project as a whole.
Delayed tasks on the critical path is absolutely reflected in delays to the project as a
whole.
Each activity is represented as a node on the network, and connecting lines are drawn to
represent the time schedule to complete that activity.
As shown by, ubrt, Langrov (2003, p.74), the CPM is created by completing the following steps:
Identify and determine the sequence of the activities.
Creation of network.
Determining the duration of an activity and the calculation of partial terms of
nodes.
Finding the Critical Path and its analysis.
Calculating time reserve for nodes and activities.
The basic parameters of the model CPM.
15
Identify and determine the sequence of the activities

The key factor is to complete the sequence of the activities. Activities which are linked
have to be analyzed and connected to achieve the expected result. Activities must be identified by name and duration.
Creation of network
After definition of all activities and analysis of interdependence of all activities, it is required to create the network. The network is based on calendar days.
Determination of the duration of activity and the calculation of partial terms of nodes
Each activity and each node is characterized by the following parameters as exemplified by
Rodriguez (2011):
ES Early Start: earliest time to start a predetermined activity, given that prior activities must be completed first
EF Early Finish: earliest finish time for the activity
LF - Late Finish: latest time the activity must be completed without delaying the entire project
LS Late Start: latest start date that the activity must be started without delaying
the project
Finding the Critical Path and its analysis
Another definition of The Critical Path by Rodriguez (2011): is the path through the project network in which none of the activities have been delayed, that is, the path for which
ES=LS and EF=LF for all activities in the path.
Below is an example of the Network with the activities and nodes, the Critical path is highlighted by a double line.
Obr. 1
2.2
16
Picture: CPM Network diagram with Critical Path1
Project Evaluation and Review Technique (PERT)
The Authors of the PERT method include,D. G. Malcolm, J. H. Roseboom, C. E. Clark

and W. Fazar, all of whom were members of the team that started work for developing a
new way of managing the development of military missile systems as part of the Polaris
project during the 1950s in United States. This fact indicates ehek (1977, p. 7).
Janov, Kolman (2011) has shown that the PERT method is a non- deterministic extension
of the CPM method. While CPM assumes each activity has a fixed duration, the PERT
method understands each activity as a random variable and has some probability
distribution. Empirically it was found that in practice they are best represented by a beta
distribution. The method is used to control complex events having a stochastic character.
The PERT method involves three time estimations for each activity, Fiala (2008) shows:
- Optimistic time: the estimation of time required under optimum conditions,
- Most likely time: the most probable amount of time required,
- Pessimistic time: the estimation of time required under the worst conditions.
The beta distribution is generally used to describe the basic variability in time estimates.
Source: Upper down district school board
Obr. 2
17
Picture : Beta distribution in PERT2
The define key activity parameters used for analysis in PERT are:
Expected duration -
- it is weighted average of the three time estimates

,
(3.1)
Standard deviation
,
(3.2)
Variance
(3.3)
When analysing complicated problems, it is important to always determine the probability

of finishing by a certain time, even though the problem may ask for the probability of finishing beyond the time. The expected project duration (EPD), which is the mean duration
for completing the project, is the critical time of the project. Activities on the Critical Path
defining the EPD as:
.
Source: PROJECT MANAGEMENT
(3.4)
18
Similarly as EPD, the overall variance is the sum of the variances for all activities on the
critical path and is defined as:
.
(3.5)
Than Z, the number of standard deviations of a normal distribution is given by following

formula:
),
(3.6)
where:
TD
..target duration,
EPD ..expected duration,

..standard deviation.
Example of the network diagram for a project is shown in the picture below, with 3 times
estimations for each activity. Left figure is Optimistic time, middle figure is Most likely time
and right figure is Pessimistic time.
Obr. 3
Picture: PERT Exampel3
Source: Skripta ZU
2.3
19
Theory of constrains (TOC)
The Theory of Constraints states that every system must have at least one constraint limiting its output. Leach (2000)
TOC as overall management philosophy, that is geared to help organizations continually
achieve their goals. Cox, Goldratt (1986)
The TOC is a thinking process that enables people to invent simple solution to seemingly
complex problems. Bates (2006)
There is no choice in the matter; either you manage the constraints or they manage you.
The constraints will determine the output of the system whether they are acknowledged
and managed or not. Bates (2006)
All of the above mentioned are definitions for Theory of Constraints. TOC was initiated by
Dr. Eliyahu M. Goldratt, in his book titled The Goal in 1984, since that the theory is still
evolving. The main motto of this philosophy is: The goal is to make more money, now
and in the future.
The TOC process look for to identify the constraint and restructure the rest of the organization around it, through the use of Five Focusing Steps.
According to the motto or The Goal the Five Focusing Steps are:
1. Identify the constraint in a system
Limitations of a single project is what prevents it to be completed in a shorter time,
given the resources. To be able to manage a constraint, we have to first identify it.
In TOC terminology the Bottleneck is the constraint. To name some constraint
Bottleneck, we have to be sure that the requirements imposed on it are higher than
the maximum possible availability of this resource.
2. Decide how to exploit the constraint
20
Once the constrain is defined, now the company has to focuse on how to deal with
this situation, in other words how to get more productive within the existing capacity limitations.
3. Subordinate all processes to the constraint
whole organization or system must adapt to support the weak link by accepting the
decision made above.
4. Elevate the constraint
After all steps before are satisfied it means the main constraint is define, exploited
of the available capacities, subordination of non-constraint resources, the next step
is to determine if the output of the constraint is enough to supply market demand.
Company should make another major changes to break down the constraint.
5. The fifth step is to go back to the step number 1 and repeat whole process again.
According the definition that every system must have at least one constraint.
Metaphoric explanation of TOC
Example of a group of cyclists. Assuming management by which a team leader can let all
the members (activities) reach the final destination (increase throughput) as soon as possible. The team leader doesnt know how good the members are in their physical capacity.
After starting to ride the bicycles the team leader realise who is the weakest member of the
team, i.e. the bottleneck (first step). Everytime somebody will be the weakest member of
the team. (definition).
The interval between the person who is the bottleneck and the person who rides
before him will get wider and the same is the opposite direction, the interval between the
bottleneck person and the person who rides behind him will get narrower. One of the solution of this issue could be place the bottleneck person at the front of the group (second
step) to make all the other members synchronize with him (third step). Like this the group
21
does not spread out and the speed of the weak person increases a little bit, allowing the
speed (throughput) of the whole team to increase by increasing the speed of the bottleneck
person. The team leader can come out with more ideas how to increase the speed of the
bottleneck. Can give him some refreshment and cold water or by cheering him on to increase his capacity and the increase of the whole team (fourth step).
Can happen that the speed of the whole group increase, it can cause another member decrease the overall speed and become the new bottleneck of the group (fifth step).
The team leader have to repeat the same process for the new bottleneck again so the overall speed will get faster and faster.
Important is to point out the concept to increase the overall speed not by making
all of the members exercise at the capacity they can handle but by making improvements
focusing on the capacity of one or more bottleneck persons.
2.4
Critical Chain
The Critical Chain Method is a superior network analysis technique. The method is based
on CPM and includes accessibility and availability of resources Cook (1998) while at the
same time Critical chain is an extension of TOC, designed specifically for project environments Goldratt (1997). The Critical Chain Method, as well as in the Theory of Constraints
(TOC), aims to determine the duration of a project based on the so-called critical chain
length, which is a sequence of interdependent activities with the smallest advance. It also
takes into account the limitations imposed by resources and the moving parts of the
implicit reserve activities in so-called action buffer. The concept of critical chain is replaced
by the critical path of the CPM. The Critical Chain Method allows for facilitating effective
coordination of individual time.
This method thus combines CPM and the TOC reduction theory that is seen as a shared
resource with capacity constraints and sets the calculated time with some reserve.
Therefore improves results by eliminating the shortcomings of CPM or PERT.
22
Critical Chain is defined by time as the longest possible path from start point to end point
of a graph and takes into account the capacity constraints of the resources. Each project
has at least one critical string. Each critical chain consists of a list of activities a project
manager should focus on if he wants to ensure timely completion of the project. The Date
of completion of the last task in the critical chain is also the date of completion of the
project. For critical tasks to be their total time reserve and thus free time reserve is equal to
zero, ie., that delays the start of this task or extend its duration will affect the project end
date. Critical chain is reflected in the scheduling and project management in virtually all
phases of the project life cycle.
The difference between Critical Chain and Critical Path is that Critical Path is the longest
possible path from start point to end point without taking into account the capacity
constraints of the resources. On the other hand Critical Chain taking into consideration the
capacity constraints of the resources.
Critical Chain is used in practice in numerous multinational companies, including some of
the largest USA companies like Boxing or General Motors, or within the frame of Czech
Republic with companies such as AutoCont CZ, A.S., Hewlett-Packard, s.r.o...
Critical Chain addresses the following areas
Multitasking
Multitasking is a common phenomenon of the matrix organizational structure or
multiple concurrent projects. The principle is the same; the staff are involved either
in projects or in the obligations arising from the project, depending on their
position. Priorities for each specific activity are then more a result of the pressure
from the managers side.
Relay race Approach
23
Critical chain sets using the tools of project management situation where individual
resources for starting work on the project activity runs as fast as possible and once
work is completed, immediately forward it to continue regardless of the term.
Murphy's Law = "There's always something wrong."

Uncertainty over the actual projects activities are accumulated from each activity
and stored in the buffer time. Instead of time provisions, which are usually
associated with different activities, using Critical Chain accumulates time buffers
located at the end of the project and on the road project linking with the Critical
Chain. Cuts the time the reserve is based on the fact that everything will go wrong.
But this is just about as likely as the fact that everithing will go right. Accumulated
time buffers to exploit the positive variations during the project.
Parkinsons law
Another reason why the duration of the project exceeded expectations is that
workers continue to work on a task, even if the task is already completed. If a
worker can complete the task before the estimated time they are rarely admitting
this fact. They are afraid that next time they are assigned the same task they will be
given less time to complete it, and will no longer be able to successfully accomplish
the task. Many companies try to eliminate the Parkinson's Law by the introduction
of motivational factors.
Student syndrome
Student's syndrome has the same principle as a student preparing for an exam, or to
fulfill a given task. First students tried to negotiate an extension of the deadlines for
submission. Once they succeed, the students should begin working immediately on
a given task. The students rarely start to work on the given task immediately,
assuming they have enough time to submit the deadlines. Students tend to start
24
preparing at the last minute, the same as workers in companies. Picture 3.1. shows
the efford of student to submit a task.
Obr. 4
Picture: Students Syndrom4

Monitoring of the activities based on time buffers
Critical Chain works with milestones and time buffers. Time buffers are used for
setting priorities and close monitoring of the time buffers can avoid or prepare a
company for critical situations.
Procedure for the calculation of Critical Chain

Definition of the project
Each project consists of a list of tasks which have to be created to allow us to
define the project as whole. To define relationships between tasks, which show the
time sequence of the tasks, allows us to calculate the duration of the project. To be
able to determine the duration of the whole project, we have to know the duration
of each task separately.
The WBS (Work Breakdown Structure) must be made. This is the method
of dividing the project into work packages, tasks, or activities. Its task is to ensure
that all required project activities have been identified and logically linked.
Source: Ptoject Management Podcast
25
Another important step is to define and assign resources to tasks. Resources can be both
human and material. Human resources may include anyone in a specific organizational unit
or other people with certain skills. Material resources are any kind of equipment such as
manufacturing equipment, computer usage, time, etc. Money may be considered the
material resource.
Based on all this information put together the initial network design. Network
graph shows what resources are required and when, which may reveal that some resources
need to be more than they will at some time available.
Resolving resource conflicts
Critical Chain takes into account both time analysis and resource analysis. By contrast,
Critical path distinguishes only the time analysis.
Resources become overloaded when they are assigned to work beyond their capacity, for
example, when a full-time employee is assigned to multiple tasks simultaneously. An
indispensable and irreplaceable source can become a critical resource. To determine the
criticality of resources you can use an objective or subjective approach.
With an objective approach it is appropriate to use methods of multi-criteria decision
making, such as the TOPSIS method. The principle of TOPSIS is to choose such
alternative which is as close to the ideal solution as possible, and the same time as far from
the negative solution as possible. A subjective approach is based on personal experience
and in general is used for small projects. Another possibility is the combination of both
approaches. The project manager can use his experience together with objective evaluation.
Identification of the Critical Path
26
Goldratt contends that most schedules have safety time built into each task esimate. Cook
(1998) Figure shows under distribution presenting the possible outcomes for most of the
tasks.
Obr. 5
Picture : Probability of Task Duration Time5

As Stephen Cook describe in his study (1998) the mentioned times has the follow
meaning:
Time A
Is the co called Pure Success basis.
Time B
Time B is presented as the estimate of the duration of a task. 50 % of the outcomes
are less than it, and 50% of the outcomes are greater. This is the median task
duration and the time estimate one attempts to build into a Critical Chain schedule.
Time C
Source: S. Cook (1998)
27
is highly achievable, despite unexpected disasters. Goldratt calls this time 95%
time because 95% of the time a resource will finish sooner than the given estimate.
Managers always setting estimates with safety built in.
While identifying Critical Chain we must successfully complete steps one and two, then
find the Critical Path. Which is the longest path in the network and resource dependencies
after resolving resource contentions.
This is similar to the PERT method, however, Critical Chain goes deeper. Critical Chain
Methods use for calculating the Critical Path times B instead of times C as is the case with the
PERT method.
Buffers
After removing the safty part from the task or other words after moving from Times C to
Time B we have to create buffers with the time we saved by cutting down the tasks. Buffers
have the capacity to absorb overrunning tasks without affecting the targeted end of the
project. Distinguish three types of buffers:
Project Buffer
They are placed at the end of Critical Path, or in other words, at the end of the
project. The size of the Project Buffer is half of the length of the Critical Chain
tasks. As already mentioned above, Project buffers protect the project from
overruns on the Critical Chain.
Feeding Buffers
Feeding Buffers have the same function as Project Buffer in that they protect the
Feeding chain against overruns. Feeding buffers are placed where the feeding chain
intersects with the Critical Chain. The size of the Feeding Buffer is equal to half of
the length of the feeding chain.
Resource buffers
28
Resource Buffers are used when working with limited resources. The Resource
Buffers ensure the availability of the resource during the whole project. These
buffers are used at times when limited resources are being used to ensure the
activities that lie on the Critical Chain, while ensuring other activities.
Identification of the Critical Chain
Inserting the buffers changes the network topology. It is therefore necessary for the
new network to find a new Critical Path. When finding a new Critical Path we have
to make sure the buffers have the right length or the critical path will need to be
recalculated. This procedure must be repeated until the source is not in conflict
with any of the critical resource. At this point you may fully declare that critical
path of the project is consistent with the critical chain.
Example Critical Chain

The following table is defining project which has six activities. Activities are marked with
the letters A through F and are secured by five different working sources. The table below
shows the duration of each activity and their predecessors.
Activities
A
B
C
D
E
F
Tab. 1
Duration
4
8
12
4
4
8
Predecessors
A
B
C; F
A
E
Resource
Working
Working
Working
Working
Working
Working
Critical Chain example
Defined project can be viewed in the network diagram as shown in Figure . The Critical
Path was already found in this project, which consists of the activities A, B, C, D. The
length of the Critical Path is 28 days.
A=4
B=8
C = 12
D=4
E=4
F=8
Obr. 6
29
Picture: Network diagram for example from Tab.16
The next step is to shorten the duration of each activity by 50%, to do so we will have
following data available.
Activities Duration Reserve
Tab. 2
Median
Duration
12
Critical Chain Median duration7
The following is the calculation of the Project Buffer and Feeding Buffer. As mentioned
in the previous chapter, the Project buffer is equal to the sum of median durations of the
activities forming the Critical Path . In our case it is activities A, B, C, D. The Feeding
chain consists of two activities, E and F. Feeding buffers will be placed where the feeding
chain intersects with the Critical Chain. The values of the two buffers are shown in Table
.
Activities
6
7
Source: Own source

Source: Own source
Median
Duration
Activities
Median
Duration
SUM
FB
SUM
14
PB
Tab. 3
30
Critical Chain Feeding a Project buffer8
The following Figure shows adding the Project and Feeding Buffers in the project.
A=2
B=4
C=6
D=2
E=2
Obr. 7
F=4
PB = 7
FB = 3
Picture: Critical Chain with Feeding and Project Buffer9
There is no conflict in sources; we can state that the critical path of the project is consistent
with the critical chain. The total duration of project as determined by the Critical Chain will
be 21. The original duration of Critical Path was 28 days. Applying the Critical Chain
method to the project save us 7 days, which is remarkably different.
2.5
Microsoft Office Project
Microsoft Office Project is a powerful and flexible tool to manage both simple and
complex projects. MS Project is the most widely used tool for project planning and management, not only in the Czech environment. The program has become a world standard
because of its affordability and full compatibility with products from Microsoft Office
Professional. MS Office Project allows you to manage large projects in various areas from
construction and engineering activities, to marketing activities, the introduction of new
products, and software testing, to re-engineering and the planning of infrastructure
development in the regions. Samuk (1998, pp.XVII) The output of MS Project is on one
side the project schedule and on the other side a detailed analysis of project costs,
consumption, labor, and material consumption. MS Project allows you to effectively
8
9
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31
manage resources and to pay attention to different types of emergencies and whether they
are sources of congestion, over budget, or keeping the date. The great advantage of MS
Project is a wide range of graphical outputs and outcomes in the form of reports.
2.5.1
View in MS Office Project
MS Office Project offers various views in any phase of the project. The various views can
show a subset of information from a database format as showed Hydrk (2007) in his
book. All views allow the user to enter information, edit information, or simply view
information. We can get different views while organizing the project, doing the task
scheduling and resource scheduling, or monitoring progress in the project from different
sides. There are two main categories: view of tasks and view of resources.
Charts and graphs
Charts and graphs represent the optimum way of viewing information in the project. The
most common type of this view is the Gantt chart, which also belongs to the most used
views on project management. Gantt chart is the list of tasks, including related data or a
diagram showing the tasks with duration over time. This display is used to enter and plan
tasks.
Obr. 8
Picture: MS Project Chart10

Network diagram
In addition to the names of tasks and their time duration, knowing the start and finish is
also important to see the relation between tasks. For this purpose MS Project contains the
10
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32
network diagram. The main advantage is a good overview of the critical path and duration.
The disadvantage can be an especially bad picture of deadlines due to the inability to view a
timeline and difficult modeling of summary tasks.
Obr. 9
Picture: MS Project Network diagram11

Lists
The lists represent a way to view information about the project in the form of text.
Lists provide information about tasks or resources in a tabular format. While tasks
or resources are in rows, categories of information about them are in columns. The
most widely used view is a List of resources and List of tasks. Both these views are
suitable for procurement and planning either tasks or resources.
Obr. 10 Picture: MS Project List12
Forms
Form is best used to enter detailed information about tasks and resources. It is usually used
in conjunction with another display. In this case, it acts more or less as a support function.
Viewing information on the project can be simple; we can draw from a single
screen display or a combined view where the screen shows two mutually, functioning
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33
connected display. Using the combined display can highlight the benefits of certain types of
display contrast and minimize their weaknesses. Combination display is often used as Gantt
Chart with a form of tasks or Gantt chart with a diagram of dependencies, etc.
Obr. 11 Picture: MS Project Form13
Tables
The tables contain information about tasks or resources in a tabular format which means in
rows and columns. Each column contains information such as start dates or rates.. The
table Costs, shows all the necessary information on the cost of tasks. Switch to the Work table
to display information regarding the work to be done to complete the task, such as the total
and remaining work. Like other views, the tables are divided into two categories, the table
of tasks that can display tasks and resource tables used to display resources.
View most of the time shows all tasks or all project resources. The project often
includes a large number of tasks or resources that will share some of the properties. Some
tasks can be already completed, other tasks are aggregated, and other resources may be
overloaded. To view information about the tasks or resources that share certain
characteristics, we use a filter.
13
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34
Obr. 12 Picture: MS Project Table14
Filters
Filters include criteria determining the conditions which the shown tasks or resources must
meet. Filters, as well as view or table, is divided into two main groups: filters of tasks, and
resource filters. Both these groups contain three types of filters desribed Kali, ha (2008):
Standard
Differentiate tasks and resources on one or more of the commonly used criteria. For
example, to display only the critical tasks, we use the Critical filter.
Interactive
Interactive criteria filter requires filter values. Value range or simply value can be
entered.
Automatic
The fastest way to view subsets of tasks or resources is Automatic. These filters are
available only in tables, and displays the tasks or resources that match the criteria
associated with a particular column, where each column contains an automatic filter.
Obr. 13 Picture: MS Project Filter15
Group
A similar principle as the filter is adopted for the creation of groups with the difference
that the information are not filtered, but classified into predefined categories.
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15
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35
The goal of all views, tables, filters or groups is to get different perspectives on tasks or
resources to obtain the maximum amount of information relevant to the development of a
project, but also project management.
Obr. 14 Picture: MS Project Group16

MS Project 2010 is currently the most widely used tool for project planning and
management. Projects such as the Prague metro, marketing plans of major global banks,
mobile network concept development, and concept development of infrastructure in the
regions, are being run and managed with the help of MS Project. Good knowledge of the
environment in conjunction with the orientation in the field of project management is great
advantage for efficient labor market.
2.5.2
PERT Analysis toolbar
The MS Project is able to calculate the PERT analysis, but does not allowed the probability
analysis. To control the PERT analysis in MS Project is used PERT Analysis toolbar.
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36
Obr. 15 Picture: MS Project PERT Analysis toolbar17

If we want to change the values set weight use the PERT Set Weights. Weights are set by
the MS Project as shown in Figure.
Picture: MS Project Set PERT Wieghts18

2.5.3
CCPM+
MS Project can not calculate the Critical Chain without an additional tool. One of the tools
or add-in applications is CCPM+ program.
Obr. 16 Picture: MS Project CCPM+ toolbar19
Source: Own source

Source: Own source
19 Source: Own source
17
18
37
3 Projects Description
As mentioned above, the company does not want to be named for very obvious reasons.
These days competing is all about gathering information on your competitors, therefore,
this thesis could become a powerful competitive weapon for them. The company is a world
leader in the apparel industry and one of the world's largest fashion retailers, welcoming
shoppers at its eight store formats boasting more then 5.000 stores in 77 countries
throughout Europe, the Americas, Asia and Africa, and from April 2011 in Australia as
well. Each format focuses on a different group of customers according to age, gender, and
income status. The Company also owns more than a hundred companies associated with
the manufacture and distriution of textile and fashion design. A unique business model
based on innovation and flexibility is the main reason for the group's success.
Creativity, quality design, and rapid turnaround are the key elements in the company's approach towards fashion, and this helps them adjust to the changing market demands. This approach allowed the company to expand worldwide at a fast pace and has
generated a splendid public response to the retailers' collections.
The first store opened to the customers in 1975 in A Corua (North-Western Spain) the same place where the Company started business and where the headquarters are still
located.
The company is the sole or majority shareholder of all the stores they open, and
this is the development strategy for the sales formats. In culturally different and hard to
understand markets, the company has extended the store network through franchise agreements. At the end of the year 2010 there were 710 franchised stores out of more than
5.000 stores.
As is written in Press kit and was mantion above, the company has different fashion concepts which segment its approach to the market. All of them share the same commercial and managerial focus: to be leaders in their segment through a flexible business
model and an international scope. However, each of the concepts have a great deal of autonomy in managing its business; their management teams are independent in commercial
decision-making and in the way they administer their resources.
38
Company XY, as the parent company, is responsible for the central corporate services, i.e. those services shared by the eight concepts and which facilitate international
growth: administration, the use of logistics technology, the general HR policy, legal issues,
and financial capacity, among others.
3.1
3.1.1
The concepts of the Company XY20:

Concept A
is the flag ship brand of the company. First store opened in 1975 in A Corua in Spain.
Since today there are more than 1.700 stores open in 77 countries, ideally located in major
cities. The turnover of this concept is 8.088 billion Euros as written in their Annual report.
It includes many different styles of fashion products, from casual clothing to formal wear.
But always with an emphasis on the latest trends, consistent high quality, and affordable
prices. Fashion for women from 18 and up, men 20 and up and kids clothes from 0 to 14
years old. There is six stores in Czech Republic, five of which are located in Prague, and
one we can find in Brno.
3.1.2
Concept B
was founded in 1991. By the end of 2010 more than 680 stores in 46 countries were open
with a turnover of 857 million Euros. This brand foces on youngpeople who dress casually,
rejecting stereotypes and want to feel comfortable in their clothes. This concept draws its
ideas from international trends, mixing them with street, club, and urban fashion influences
and reinterpreting the style to create comfortable and easy to wear clothes and accessories
at accessible prices. Fashion for women and men from 18 to 25. Four of these stores are
open in Czech Republic, three in Prague and one in Brno.
3.1.3
Concept C
this concept was developed in 1985 and joined the Group in 1991. Today it has more than
530 stores in over 50 countries. Their turnover is 897 million Euros. The brand originally
Because the Company doesnt want to be named, is obvious the individual concepts can not
be named neither. Lets named them in alphabetical order.
20
39
focused on mens fashions and in 1992 concept C launched its women fashion collection.
2003 saw the launch of its collections for boys and girls. Not all stores have the kids collection, only those stores which are large enough. The concept offers a wide variety of
clothes, from sophisticated high-end fashion clothes to easygoing casual wear. This chain is
more expensive than the rest of stores in the group because it focuses on high quality garments from next-generation and 100% natural fabrics. Fashion for women and men from
21 and up, recently for children from 5 to 10 years old. Concept C has only one store in the
Czech Reupublic and it is located in Prague.
3.1.4
Concept D
was founded in 1994 and acquired by company XY in 1999. There are currently 593 stores
in 43 countries. The turnover of this concept is 780 million Euros. This brand has an innovative and youthful approach to fashion. Very feminine, fresh and creative clothing and
accessories. Targeting young women ages 18 to 35. We can find this concept in Czech
Republic, but only in Prague.
3.1.5
Concept E
is the sixth concept of the Group and it started business in 2001. It has more than 432 stores in only 25 countries, mainly Spain. Their turnover is 305 million Euros. This concept
sells lingerie and woman's underwear and bathing suits during the summertime. Targeted to
all women, including a collection for little girls and babies. There are currently no stores for
this concept in the Czech Republic.
3.1.6
Concept F
was founded in 2003 and it now has 284 stores in 27 countries. Their turnover for the year
2010 was 294 million Euros. This concept specialises in home decor and linens. Its textile
collections for beds, tables, and bath linens are complemented by dishware, cutlery, glassware and decorative accents, all of which are offered for a competitive price. There are no
stores in Czech Republic.
3.1.7
40
Concept G
is the newest concept to be created by the Group in 2008. Nowadays, it has more than 80
stores in 16 countries with a turnover of 59 million Euros. This concept was born with the
clear idea to make accessories a must. In general this concept offers accessories such as
handbags, shoes, jewellery and sunglasses. More costly than the other concepts, except for
concept C, it stays within the price range of other big brands offering accessories in the
market. This concept is too new and costly to be in Czech Republic at this time.
3.1.8
Concept H
last but not least, concept H is the most important concept for the development of this
diploma thesis. Established in April 1998, this concept has the second largest number of
stores with precisely 720 in 50 countries around the World. Their turnover is the second
highest with 1.247 billion Euros.
Focused on hip teenagers with a passion for the latest trends. Stores of this concept
can be devoted to each product line. In front of the store is a product line suitable for
young ladies who are looking for the most fashionable clothes, night wear and casual
trends. This line is usually one of the more expensive for this brand. The second product
line for women is more colorful, sporty, and youthful. The youngest customers keeping an
eye on garments which can be seen on MTV, or movie stars and idols. Since 2002 they
have also sold men's wear. No doubt, the main articles are the jeans in all cuts, always in
line with the latest trends. Also, more sport and casual pieces of clothing are housed in this
brand for young males. Apart from a wide range of fashionable clothing, all of the lines
include a huge selection of accessories and shoes.
Concept H targets the young female and male market ages 13 to 25.
There are four stores of this format in Czech Republic, three of them in Prague and
only one in Brno.
In the Czech Republic company XY owns 16 shops, almost all of these stores are
concepts and they are located only in Prague and Brno. There are 13 shops in Prague and
three in Brno. This fact shows that the company is focused solely on building their
businesses in large cities. Further proof can be the distribution of stores in Hungary where
eighteen stores are in the capital Budapest, and only two shops in Debrecen. Slovakia has
41
all six stores located in the capital Bratislava. In Austria the majority of the stores are
located in Vienna (11 stores), with two stores in Innsbruck and two stores in Gratz. This
inormation shows that Company XY has a clear policy on the location of it's businesses
and placing them in strong cities helps to ensure success. Of course it also depends on the
politics of business formats.
When Company XY enters a new market21, it always opens the flag ship brand first
in the capital of the country. If this store does well the Company will open other formats.
An exception may be the opening a new shopping center, where Company XY may open
more than one business concept at the same time. The last concept is an open concept
which is aimed at the wealthiest clientele.
The one exception to the rule is the home base of the company, Spain. Of the
5.022 stores worldwide, 1.925 are located in Spain. There are no rules to the placement of
stores in Spain, they just have to be successful.
Special rules for placement of Concept H stores
The idea of the concept H stores is to be spacious with cutting edge design. A must see
place for street fashion, music, and art. The stores are meant to be a meeting point for
young customers who can listen to loud music, watch videos with a fashion theme, and
read magazines on comfortable sofas. All the elemetnts in the stores are disigned by decoration teams. Every season most of the elements change to match the collection, for example, the style of music, wall-prints, and the decoration. The motto of the concept is: "Turning shopping into a fun experiance".
One main reason why Company XY pays such attention to all these rules is that the
stores, and the store windows are the best advertising campaign. The company spends almost nothing on advertising. No fotoshoot campaigns, no television commercials, and no
magazine ads. No special deals for regular customers and no membership clubs. The only
advertising is the stores themselves and satisfied customers.
Therefore, the Company applies the principles of its business philosophy to the
unique architecture of the shops. Stores should offer the customer original design and
permanent innovation, so the customer won' t ever be bored. Although sharing the same
rules, each store is unique and must adjust to different cultures and environments, while
21
The country is mostly taken as the market.
42
maintaining an emphasis on company policy. The company's architectural projects often

involve historic building renovations.
3.2
Project specification
Company XY was considering opening a new store of concept H in Brno. A store of this
concept is already open in Brno, in the shopping center Galerie Vankovka, and based on its
excellent results, they have decided to open another concept H store in Brno. According to
the above mentioned special rules regarding to the placement of retail stores in those
locations, the company needs to decide between the two variants. Both variants are
completely different and will be described in the following paragraphs.
3.2.1
Projec Town
This option allows for the reconstruction of the existing parts of a building on Masarykova
Street. This street is one of the busiest shopping streets in Brno, which leads to Svobody
square, and is the main square in Brno. Tourists pass down the street every day as well as
locals to the city of Brno, both of whom tend to shop.
The building is devastated, so it would need complete reconstruction, including
repairs to the adjacent sidewalk and the entrance to the cargo bay for receiving deliveries.
Company XY would become the owner of the premises which is intended for
business, and the rest of the house would still be owned by housing cooperatives. A
competitive women's fashion brand used to occupy the area where the store will be built.
It's a positive point that the space is alredy built for commercial use and will only need
minor adjustments to stay in line with company policy. On the other hand, the store could
be confused with the competition that previously occupied the space and their lack of
customer service.
The commercial space consists of parts of the basement, where a warehouse is
expected too be built. The warehouse would occupy most of the basement area. In
addition, facilities for employees, including a locker room area, bathroom with shower,
kitchen with common room, and safe rooms and utility rooms. An elevator would be built
into the basement to facilitate redistribution of the products when deliveries arrive.
43
The ground floor is calculated with the main sales area which was designed for the latest
collections, including both product lines for women. When the customer enters the shop
they are drawn to the entertainment area. This area consist of comfortable sofas, where the
customer can read fashion magazines or just relax with friends. The motto, "turning
shopping into a fun experience" would be fulfilled.
The cash registers would be located to the left of the entrance, behind which there
is an administrative room and space for reservations.
Next to the cash registers would be the escalators that transport customers to the first
floor. Customers can also reach the first floor by using the stairs or the elevator. The
ground floor also offers changing rooms where customers can try on all the clothes. The
shoe area and accessories wall are also located on the ground floor.
Two major landmarks on the first floor are the men's wear collection and the older
women's collection. The customers can try on the clothes in changing room on this floor
as well.
There is no possibility of a parking lot since the store is located in a pedestrian
zone.
The plans of the shop may be found in Annexis 1-D, 2-D, 3-D.
3.2.2
Project Mall
The second project plan for the rebuilding of the retail units in shopping center Olympia.
The Olympia Shopping Center is located on the outskirts of Brno close to highway D2 in
the direction of Bratislava, near the D1 highway to Prague. The shopping centre has secured sufficient parking capacity, as the parking areas adjacent to the barrier-covered garage
are connected directly to the trade center. Olympia operates a free bus line that connects
the city center of Brno with trade center. The bus runs at intervals of 7 minutes and the
journey takes approximately 10-15 minutes, depending on traffic. The strategic position
between Prague, Bratislava and Vienna, with a wide catchment area supports the perception of Olympia as an important regional shopping center with international clientele. As the
web site for the Olympia shopping center say:
Catchment area within 30 minutes
800 000 inhabitants
Catchment area within 60 minutes
1.6 million inhabitants
44
Olympia Shopping Centre with its architecture differs significantly from competing
projects that already exist in the Czech Republic. The center offers the possibility of not
only shopping but also entertainment in a multiplex cinema and bowling.
Company XY would become a tenant of the shopping center, they would pay a monthly
rent
which
would
be
calculated
from
percentage
of
their
sales.
Reconstruction of the business units would not require any major interventions. The
shopping centre has secured all utilities, including air conditioning, which is designed just
for the business unit.
It would be a classic retail space in the shopping center. The plan is shown in
Annexe 4-D. The entrance to the store located inside of the mall with one shop window.
Most of the area would make up the shop floor, in the rear you would find the fitting room
for customers and the menswear area. Behind the shop floor would be a warehouse
including facilities for employees.
3.3
Project scheduling
To plan the construction of the individual stores it is necessary to define the various
activities of both variants separately. The investment department provided a list of
activities for both stores. After thorough examination, I found that the lists for the two
variants do not correspond to Czech standards particularly in respect of the Building Act.
After that discovery, I approached the architect with whom I consulted all of the building
management issues. On his advice, I adjusted the duration of all the activities in the
Construction phase of the project. Next, I discussed the other activiteis for both projects with
the architecht, those activities were correct.
The list was missing data on the timeframe for constructing the elevator and escalator.
Therefore I decided to address OTIS, the leading manufacurer of elevators and escalators.
First I addressed the company as a student requesting help on my diploma thesis. After my
first request I had no response. I decided to address the company as a potential customer
and I received an absolutely comprehensive respose that same day.
45
The Investment department has assigned various tasks to be performed by me, up until the
Equipment store phase. The two tasks following the Eqipment Store phase, Recruitment and
Merchandising, I was able to complete based on my experience. I have attended several store
openings as a Store Manager for Company XY, a position I have held for four years. One
of the duties of the store manager is recruiting new managers, so this phase of the project
is very familiar to me.
After collecting all important informtion on both projects, it's time to create the
work breakdown structure (WBS) chart.
A WBS, as defined in the Kerzner (2003) is a deliverable-oriented hierarchical decomposition of the work to be executed by the project team to accomplish the project objectives and create the required deliverables. It organizes and defines the total scope of the
project. Each descending level represents an increasingly detailed definition of the project
work. The WBS is decomposed into work packages. The deliverable orientation of the hierarchy includes both internal and external deliverables.
When the WBS is created, there is a need to determine the duration of each activity
and to insure the continuity of time and an animation sequence of actions to themselves.
Each activity is attributed to the source. The source describes the needs for the
particular activity. Thus compiled tables found in Annex project Town 1-A and project
Mall 2-A.
Both of the Projects include milestones that serve to structure the project into
logical parts. Milestones are not shown in network graphs. The network graphs are
displayed only by the individual activities.
All activities are linked to each other by FS dependencies (Finish to Start), which
means a task cannot start before the previous task is finished. The order of tasks treats the
first as the predecessor, the second as the successor.
3.3.1
Tasks in Town project
The entire reconstruction project on Masarykova street consists of 76 activities, including

twelve milestones and one activity is designated as the general task of the project. Project
start is planned for and should finish in compliance with all terms as set forth in the table.
46
First phase in the project is Project Preparation by contracting authority. At this stage, the
design department is preparing the design of the store. The board of managers may require
some modifications in the shop plan. The board of managers approve the documentation
for the shop plan after all modifications have been made.
Another phase in the project is the Construction Project. This phase includes contacting
potential architects, evaluating their bids, and signing contracts with the selected architect.
The architect must then prepare the necessary documentation for the Planning permission
permission. After the Planning permission has been granted, the architect must prepare the
documentation to issue a building permit. Issuance of the building permit is generally termed as the most critical phase of the project, for which the exact date of completion is not
likely to be determined. After successful issuance of a building permit, the architect must
prepare Implementation documents for the building company.
The third phase of the project, Project Implementation, includes all of the preparatory
activities up to the construction of the walls and stairs.
The fourth phase, Concrete Work, contains only two activities, pouring concrete for
the basement and Driveway.
The fifth, sixth and seventh phases (exterior finish, interior finish and utilities) are in the
duties of the contractor. All activities are included in the WBS chart
The eighth stage is called Elevator and escalator. This stage consists of a selection
process to ensure the external company who will produce and install the elevator
and escalator.
Between the eighth and ninth stages the final inspection of the shop must take
place. It is not milestone only simple activity. The final inspection is a critical
activity that must be completed successfully so that we may continue on to the next
task.
Equipment of the Store, the ninth stage, is directed by the Facilities Department, which
handle the equipment for the shop floor and stockroom . The technical department
is committed to providing cash registers.
The tenth stage of the project is Security System for the store. The Security Department
will address potential security companies, assess their the bids, and sign the contract
47
with the choosen security company. The choosen security company will ensure
instalation of CCTV, gates, and Sensormatic system. This will be followed by the
hiring and training of the appropriate candidate for the security guard position.
The eleventh stage is called Recruitment and is the second most critical phase of the
project. At this stage it is necessary to find suitable candidates for managerial
positions and Sales assistants positions. Finding these candidates is very difficult
and we can hardly define the time the hiring process will take, especially for
managerial positions. Training the successful candidate for the position of manager
is fixed period of time and will take two months. This training is always conducted
abroad, with the belief that the manager will gaint the most from the experience
when placed in an alien environment. All managers start as a sales assistant and
progress through the positions until reaching the last phase of the training program,
studing the managerial responsibilities. Training of the sales assisntant is also a
fixed period and lasts 14 days. The sales assistants will spend their first seven days
in the training center acquiring the skills to work the cash registers and the
following week getting acquainted with general customer service.
The final stage is the Merchandising. Before this stage can be completed, all
contruction work must be completed, the store must be fully equipped, and all staff
must be trained. The product department will send a so called "Starting set" of
products. The logistic department is in charge of delivering the products to the
store. These products must be opened and repriced from Euros to Crowns. Some
goods may need an extra alarm, others are already fitted with an alarm tag from the
factory. Once the products are ready, they are passed to the visual marchendisers
for creating different collections. Each collection has its own name and a specific
theme it must fulfill. All collections are designed to appeal to young people.
3.3.2
Tasks in Mall project
Both versions of the projects are similar, but differ in key stages of construction and
especially in the length of almost all activities. This is evident from the table 1-A and 2-A.
The Mall project contains 11 milestones and one activity is designated as the general task of
the project.
48
The First phase, Project preparation by contracting authority, has same tasks as the first
project, but the duration differs by about 7 days. The reason for the difference is
that the Design department doesn't need 21 days to create the shop plan, they can
handle it within 14 days.
Of all fourteen phases, the second phase differs the most from the first project.
While the first project needs 242 days, the second project needs only 123 days to
successfuly fulfil the conditions of each activity. Due to the fact that this is a
business unit in an existing shopping mall we do not need to apply for Planning
permission. Thus we also eliminates the phase of elaboration of documentation for
Planning permision. The Building permit is not needed nither, only a permit
bearing the name "Decision on alteration of a sturcture and on alteration of the
impact of a structure on use of the area", which only takes a few weeks to obtain as
the process of applying for this type of permit is much easier. The length of project
implementation has been reduced almost by half.
The third phase of Project implementation doesn't require building stairs, therefore, the
length of all activities have been reduced significantly.
There is no need for any concrete work.
The activities of the fourth phase, Exterior, differ from those of the first project.
The two activities for this phase are the installation of the shop window and
entrance gate.
The fifth phase, Utilities, has the same activities but with a considerably different
timeframe. This is understandable since the shopping mall has already prepared all
the necessary unitilies, the only thing the construction company must do is connect
everything according the documentation.
The longest activity in the sixth phase, Interior finish, is hanging drywalls. It will take
about 13 days.
The seventh phase, Equipment of the store, is shorter in the second project by about x
days. Because the space is smaller, the facilities department doesn't need much time
for the selection of the equipment and the supplier needs less time to deliver the
equipment.
49
The only difference in the eighth phase is the installation of the CCTV system. The
difference is 1 day, because, for obvious reasons, the smaller space requires less
cameras.
In the Recruitment phase the length of the training for managers and for sales
assistants has to stay fixed. The recruitment of sales assistants has a shorter
duration because the store in the shopping mall is smaller and doesn't require as
many sales assistants to cover the store. The duration for the recruitment of
managers remains the same as in the first project, the number of mangers needed
to manage the store is the same.
The last phase of opening the store is Marchendising, all activities included are
shorter due to the smaller space.
50
4 Calculation of the projects

4.1
Calculation of the project using the PERT method
MS Project was used to calculate both projects using the PERT method, which is described
in more detail in Chapter 2.5.2. This chapter also indicated a toolbar designed especially for
the PERT method; the toolbar is shown on xy image. Scales set by comparison leave the
default format. Each activity can be individually set as an optimistic, pessimistic, and the
most likely variant. Detailed tables are listed in the Annex 1-B a 2-B. The results of the
calculations for both projects are presented below.
4.1.1
Project Town
As mentioned above, it is necessary to enter three different durations of each activity

separately, from optimistic, pessimistic point of view, and the most likely time. These data
were obtained after consultation with the architect, with whom I worked closely
throughout the development of whole diploma thesis. Values of durations calculated using
the PERT method are shown in table 4.
Duration Start
End
Optimistic time 392,5
1.9.2011 4.3.2013
Most likely time 484
1.9.2011 9.7.2013
Pessimistic time 675
1.9.2011 2.4.2014
PERT
1.9.2011 1.8.2013
Tab. 4
500,58
PERT analysis for project Town22
After calculating the median duration of all activities the MS Project will find the new
Critical Path automatically. In the case of Project Town, the original Critical Path is
consistent with the Critical Path after the PERT calculation method. Network diagram with
22
Source: Own calculation
51
marked critical path is shown in Annex 5-A. Project Town will start at 1.9.2011 and finish
1.8.2013, the total duration for whole projest is 500 days. All this information proves the
PERT method.
MS Project is not able to calculate probabilities, but will provide us with sufficient
information to be able to calculate the standard deviation according the formula 3.2. In
table placed in Annex 1-B and 2-B are information about optimistic, pessimistic, and most
likely durations and expected durations (calculating from formula 3.1),
The last
information in Annex 6-B is the variance which is given by formula 3.3. The standart
deviation for Project Town is almost 12 days and total duration is 500 days.
4.1.2
Project Mall
For calculation of the PERT method in case of the Mall Project we will use the same
procedure as for the project TOWN. Each activity assign to a particular activity otimistic,
Most likely, and pessimistic durations by consulting with an architect. These add value to
MS Project, it turns out that
After calculating the median duration, the MS Project automatically calculates the new
Critical Path for the project. The original calculation of the Critical Path by PERT method
had a different shape than the Critical Path after PERT calculation. The difference is the
substitution of one activity for another one. Install trim activity ID numer 33 was the activity
included in Critical Path before calculation. After Calculation this activity become noncritical and was replaced by activity ID 34 Install lightening. Network diagram with the
original critical path is available in Annex 6-A. Network diagram after PERT calculation
with marked change is shown in Annex 5-B.
PERT calculation showed that project Mall with staring day at 1.9.2011 will have duration
294 days and ends at 16.10.2012.
Duration Start
End
Optimistic time
213
1.9.2011 25.6.2012
Most likely time
295,5
1.9.2011 18.10.2012
Pessimistic time
361
1.9.2011 29.1.2013
PERT
Tab. 5
294
52
1.9.2011 16.10.2012
PERT analysis for project Mall23
The following information is given in Annex 6-B. The last column shows the variance
counted according the formula 3.3. The standart deviation for Project Mall is 6,05 days and
total duration 294 days.
4.2
Calculation of the project using the Critical Chain method
To be able to calculate the Critical Chain we have to follow all the Procedure mentioned in
paragraph 2.4.
We have already constructed a WBS for both projects to use them during calculation of the
PERT method. The WBS is the cornerstone of the calculation. In addition, we need to
construct a list of resources for each activity, this is the key chain for Critical Chain.
The program MS Project can not calculate the Critical Chain without an additional tool in
form of CCPM+ program. This special tool is briefly described in Chapter 2.5.3.
4.2.1
Project Town
The resource page of the Town project is secured by 56 resources. 31 Resources are
materials and the other 25 resources are labor. The most important resources in the
project, which are also those most critical, are Planning permission, Building Permition,
Final Inspection. Without obtaining a building permit the project can not continue.
The information obtained in the WBS and material resources list are used to construct the
network diagram. In this diagram we have to find the Critical Path. After this step all
activities will be reduced by half according to the Critical Chain approach. When finding
Critical Path, calculate the median duration for each activity that belongs to the Critical
Path. Based on the calculation of the median duratio we can now calculate the size of the
Project and Feeding Buffers. Table with the calculation of Project Buffer is located in the
Annex 1-C, because of the bulkiness of the table. Calculation of Feeding Buffers is shown
in the table 6 below.
23
Feeding Buffer 1
Tasks
42
Median Duration 7
FB_1
43
2,5
44
5
45
7
46
30
48
7
Feeding Buffer 2
Tasks
42
Median Duration 7
FB_2
43
2,5
44
5
45
7
47
30
50
7
Feeding Buffer 3
Tasks
68
Median Duration 15
FB_3
70
30
Feeding Buffer 4
Tasks
69
Median Duration 10,5
FB_4
74
7
Feeding Buffer 5
Tasks
32
Buffer
5
FB_5
34
10,5
64
1
Feeding Buffer 6
Tasks
33
Median Duration 5
FB_6
34
10,5
65
1
Feeding Buffer 7
Tasks
54
Median Duration 7
FB_7
57
3,5
Feeding Buffer 8
Tasks
55
Median Duration 7
FB_8
56
5
53
49
3,5
62
31
58,5
29,25
45
22,5
17,5
8,75
16,5
8,25
66
7
23,5
11,75
10,5
5,25
12
6
Feeding Buffer 9
Tasks
32
Median Duration 5
FB_9
Feeding Buffer 10
Tasks
27
Median Duration 2,5
Tab. 6
34
1
39
4
28
3,5
29
1
40
1
54
11
5,5
Critical Chain calculation of Feeding Buffers for project Town24
The location of Project Buffer and Feeding Buffers in the project are shown in Gannt
Chart, this chart is presented in Annex 3-C. Feeding Buffers have red colours, Project
Bufer has pink colour, all the other tasks have blue colour.
After determining the size and insertion of Feeding Buffers and Project Buffer, we need to
make sure the project does not have any critical resource, which rely in the critical path.
After examining the network chart there is no critical resource we can draw results from.
Duration of the Town Project according to the method of Critical Chain would take 327
days and would be completed at 3.12.2012, while the staring day would be the same like for
all projects 1.9.2011.
4.2.2
Project Mall
The decision procedure for project Mall is the same as the procedure for project Town.
Again starting from already designed WBS, which contains all the necessary information
about the Mall project. The WBS is presented in Annex 2-A.
Resource page of the Mall project is secured by 48 resources. 23 Resources are
materials and 25 resources are labor. Resource lists for Mall project is presented in the
Annex 6-C. The most critical resource is once again the building permit. The second most
critical resource is the training of managers.
The following step is to find the critical path in project, the longest path in the
network. The network diagram is the critical path shown in red, this diagram is located in
Annex 4-C.
24
55
Followed by a reduction of activities by half. Calculating Project buffer, adding the

median durations of activities relevant to the critical chain. Next step is to insert Feeding
buffers, and subsequent recalculation of the critical path once again, to see whether it
changed the critical path based on our embedded buffers.
Next is once again finding critical resources. If there is no critical resource we can
again draw the results.
Duration of the Mall project according to the method of Critical Chain would take
199 days. Project would start at 1.9.2011 and finish 6.6.2012.
Table with calculation of Project Buffer is located in the Annex 2-C, because of the
bulkiness of the table. Calculations of Feeding Buffers for the project Mall are shown in the
table xy below. Location of Project Buffer and Feeding Buffers in the project are shown in
Gannt Chart, this chart is presented in Annex 4-C. Feeding Buffers have red colours,
Project Buffer has pink colour, all the other tasks have blue colour.
Feeding Buffer 1
Tasks
46
Median Duration7
FB_1
47
3,5
48
3,5
49
1
Feeding Buffer 2
Tasks
46
Median Duration7
FB_2
47
3,5
48
3,5
50
1
Feeding Buffer 3
Tasks
46
Median Duration7
FB_3
47
3,5
48
3,5
50
1
Feeding Buffer 4
Tasks
53
Median Duration15
FB_4
55
30
Feeding Buffer 5
Tasks
54
Buffer
7
FB_5
56
7
15
7,5
15
7,5
51
7
22
11
45
22,5
14
7
Feeding Buffer 6
Tasks
25
Median Duration2,5
FB_6
2,5
1,25
Feeding Buffer 7
Tasks
34
Median Duration1,5
FB_7
1,5
0,75
Feeding Buffer 8
Tasks
39
Median Duration7
FB_8
42
2,5
Feeding Buffer 9
Tasks
40
Median Duration7
FB_9
43
1
Tab. 7
4.3
56
9,5
4,75
8
4
Critical Chain calculation of Feeding Buffers for project Mall25

Comparison of outputs of PERT method and Critical Chain
The following section will compare the outcomes of both methods, the comparison is also
depicted in Table 8.
Project
Method
Duration
Start
Finish
Project Town
PERT
500
1.9.2011
1.8.2013
CriticalChain 327
1.9.2011
3.12.2012
PERT
294
1.9.2011
16.10.2012
CriticalChain 199
1.9.2011
6.6.2012
Project Mall
25
Tab. 8
Comparison of outputs of PERT and Critical Chain26
4.3.1
Project Town
57
According to calculations made by PERT the project Town lasted 500 days and ended on
August 1, 2013 with a standard deviation of 12 days. By Contrast the Critical Chain
calculated for the construction of only 294 days with the expected end on October 16,
2012. The difference between the methods is significant, more than 100 days. This
difference can be attributed to the philosophy of the Chritical chain approach. Not all
activities can be reduced by 50% so that there were no overall effects on the project. We
already took into account the very critical resources such as Planning permission, Building
Permition, Final Inspection. To shorten the three critical resources by half seems highly
unlikely and not even the Project buffer would be enough to absorb the possibility of an
overrun of these three critical activities. The total duration of the project calculated using
the PERT method seems much more realistic. 500 days of reconstruction seemed to be
very likely to the architect as well.
4.3.2
Project Mall
This option offers the following results. Project Mall will start at 1.9.2011 and finish
16.10.2013, the total duration for whole projest is 294 days with the standard deviation of 6
days. All of this information proves the PERT method. Contrary to the Duration of the
Mall project, the method of Critical Chain would take 199 days to complete. The project
would start at 1.9.2011 and finish 6.6.2012. Again, a significant difference in the methods
of more than 100 days is highly unlikely. To build the store in a shopping mall within 200
days is unrealistic. On the contrary, a duration of 327 total days for constructing the store
in a shopping mall seems to be very ralistic.
26
58
5 Selection of the project

Deciding on a variant of the project is an important strategic decision in which
we must consider a number of aspects. So far, we have focused only on the
results of the time analysis, the results are in Table 8 and commented upon in
chapter 4.3.
From the results of time analysis the obvious choice of the project is the
Mall project placed in the Olympia shopping center.
When making the decision, I did not take into account the financial analysis, nor
was it my responsibility. This data is extremely sensitive and it was not
available.
There are still a large number of aspects that may help in decisionmaking process of choosing the right option. one of them is undoubtedly the
location of each project. The first project Town is located in the city center,
which may seem at first glance as an advantage. Clearly, this corresponds to the
company policy that businesses should be placed in the most luxurious location.
But this condition may snag.
For the project Town the frequency of the flow of people is ensured from
the morning hours, when people go to work and peaks during the afternoon at
about 16 hours. Over the weekend, people do not visit the city center often, we
can find a group of foreign tourists who go see the sights in the city center, but
this is not as frequent as in the capital city of Prague.
As already mentioned in Chapter xy the Olympia shopping center has a
huge catchment area, a big advantage of this location. The shopping center is
adjacent to the Avion Shopping Park, but Avion is concentrated on a different
segment of customers who go there mainly to buy furniture or electronics. The
frequency of customers in the Olympia shopping center is at it's lowest in the
morning hours of working days, but increases with time. Over the weekend, the
frequency is very high from the morning hours. The holidays are the same as on
weekends.
59
Most shops in the center of Masarykova street have the following opening
hours:
Monday - Friday:
9.00 to 19.00 hours
Saturday:
9.00 to 15.00 or 17.00 hours
Sunday:
Closed
Thus, the net working time of businesses located in the city center is 56 hours
per week. During the Bank holidays the city center is closed. In contrast, the
opening hours in Shopping Mall Olympia are as follows:
Monday - Friday:
10.00 to 21.00 hours
Saturday and Sunday:
9.00 to 21.00 hours
Including all public holidays except December 25 and January 1. The net
working hours of the shopping center in a week is 79 hours. That is a difference
of 23 hours a week. These 23 hours each week, make a huge difference in the
sales of the store. Of course, taking into account the costs that must be coverd it
is still worthy.
In terms of presentation of the brand, the Town project appeared to be
the better option. As already mentioned the XY Company does not have any
advertising only the stores by itself. Opening a new, breathtaking, modern store
would be a great advertisement for H. Concept. If XY Company became the
owner of only the commercial area of a house and this house is in very bad
condition, the question is of sufficient representation to the brand.
Another aspect regarding the location of stores is the total size of the city
and its population. H Concept opens its stores in only major cities. Prague as a
capital does not have any store of Concept H in the city center. In Prague, there
are 3 stores of Concept H and all are located in shopping centers. This would be
another argument why the project Mall is the better variant.
Another aspect could perhaps be so-called Cannibalism. A shop in the
city center would be very close to the shopping center Vakovka, where a store
of Concept H is already open. The two businesses would largely share the same
customers and would cannibalize each other on a much larger percentage than
60
in Olympia Shopping center, which has a completely different clientele and is in

a different catchment area, on the other side of Brno.
Another more practical issue is the possibility of parking. The possibility
of parking in the vicinity of the store from project Town is very limited. This
problem is also linked to the problem of supplying a store that lies in the
historical part of Brno, where there is limited access through pedestrian zones.
Deliveries are only permitted early in the morning, after which, the city center is
closed for deliveries until the next day. Major supply problems can ooccur. The
spedition company is known to have problems with being on time, thanks to the
global situation on the roads, where delays due to collisions can not be
anticipated. The company won't be able to enter the city center if there would be
a delay longer than one hour. This is linked to the additional delivery costs for
the next day, not to mention the loss of profit.
After Summarizing all of the above facts, I would decide to open a new store in
Olympia Shopping Center. First, there is a great potential to gain new customers
and the shopping center also organizes various events to attract customers.
Another reason would be the lack of presence in the space in the downtown and
the possibility of inadequate supply. Another big potential problem is
Cannibalisation with the store in Vankovka shopping center when opening a
shop in the city center.
61
Conclusion
The aim of this thesis was to use two methods of network analysis, namely
PERT analysis and Critical Chain, to calculate the actual project in real practice,
and to compare the results of both methods and the conclusion drawn from
them, which would assist in an important strategic choice.
A detailed description of the PERT method, is in the pharagraph and Critical
Chain, this method is described in pharagraph. MS Project allowed me to achieve the results, but it had two weaknesses. MS Project has PERT Analysis tools to
be able to calculate the method but doest allow calculation of the probability.
The program MS Project can not calculate the Critical Chain without an additional tool such as CCPM+ program. To be able to manage the MS Project is great
Advantage for my future professional life.
Both methods of network analysis have been successfully applied to the
example.
The Example was taken from real practice. Company XY allowed me to use very
sensitive data from the investment department. Company XY prefers to remain
anonymous, due to market positioning and sensitivity of the data provided. It
was a comparison of two project options to open a new branch of the company.
One option considered opening a branch in the city center, which would require
costly renovation of commercial space. This option is also time-consuming and
carries many administrative formalities. The second option considered was
opening a branch in a shopping center. The shopping center has already secured
all the relevant formal documents.
The calculation results of both methods clearly confirm the advantages of the
store located in the shopping mall. To select an appropriate option, it was
necessary to take into account the various criteria and factors different from
time analysis. These factors are summarized in Chapter. After careful
consideration of all factors, especially taking into account the results of the
analysis, the advantages of opening a store in the shopping center Olympia
became clear.
62
7 Bibliography
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Uncertainty in Projects. [online]. 1998 [cit. 2011-05-20]. Available from
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Construction project management. 1.vyd. Praha: Vydavatelstv VUT, 2003.
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[31] VAVERKA, M. Usage of Metra potential metod for project planning.
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_CL_%281%29.pdf
Annex
66
Annex
1A
2A
3A
4A
5A
6A
WBS project Town

WBS project Mall
Gantt diagram project Town
Gantt diagram project Mall
Network diagram project Town
Network diagram project Mall
Annex
B
1B
2B
3B
4B
5B
6B
67
Annex
PERT setting project Town
PERT setting project Mall
Gantt chart PERT method project Town
Gantt chart PERT method project Mall
Network diagram PERT change in Critical Path
PERT Critical Path project Town and PERT Critical Path project
Mall
Annex
C
1C
2C
3C
4C
5C
68
Annex
List of resources project Town
List of resources project Mall
Project Buffers for project Town and project Mall
Gantt chart Critical Chain for project Town
Gantt chart Critical Chain for project Mall
Annex
69
Annex
1D
2D
3D
4D
Plan of underground floor for project Town

Plan of ground floor for project Town
Plan of 1st floor for project Town
Shop plan for project Mall

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MENDELU UNIVERSITY IN BRNO

Faculty of Business and Economics

Project evaluation applying

Diploma thesis supervisor:

Bc. Anna Horkov

In Brno, 24th of May 2011,

1 Introduction and goals

Critical Path Method (CPM)......................................................................... 13

Project Evaluation and Review Technique (PERT) ......................................... 16

Theory of constrains (TOC) ......................................................................... 19

Microsoft Office Project ............................................................................. 30

View in MS Office Project ...................................................................... 31

PERT Analysis toolbar ...........................................................................35

The concepts of the Company XY: .............................................................. 38

Project specification ....................................................................................42

Project Mall .....................................................................................43

Project scheduling .......................................................................................44

Tasks in Town project............................................................................45

Tasks in Mall project ............................................................................. 47

Calculation of the projects

Calculation of the project using the PERT method ........................................ 50

Project Mall ...........................................................................................51

Calculation of the project using the Critical Chain method.............................. 52

Project Mall .......................................................................................... 54

Comparison of outputs of PERT method and Critical Chain .......................... 56

Project Mall ...........................................................................................57

Selection of the project

Picture: CPM Network diagram with Critical Path

Picture : Beta distribution in PERT

Picture: PERT Exampel

Picture: Students Syndrom

Picture : Probability of Task Duration Time

Picture: Network diagram for example from Tab.1

Picture: Critical Chain with Feeding and Project Buffer

Picture: MS Project Chart

Picture: MS Project Network diagram

Picture: MS Project List

Picture: MS Project Table

Picture: MS Project Filter

Picture: MS Project Group

Picture: MS Project PERT Analysis toolbar

Picture: MS Project CCPM+ toolbar

Critical Chain example

Critical Chain Median duration

Critical Chain Feeding a Project buffer

PERT analysis for project Town

PERT analysis for project Mall

Critical Chain calculation of Feeding Buffers for project Town

Critical Chain calculation of Feeding Buffers for project Mall

Comparison of outputs of PERT and Critical Chain

1 Introduction and goals

Critical Path Method (CPM)

Identify and determine the sequence of the activities

Picture: CPM Network diagram with Critical Path1

Project Evaluation and Review Technique (PERT)

The Authors of the PERT method include,D. G. Malcolm, J. H. Roseboom, C. E. Clark

Source: Upper down district school board

Picture : Beta distribution in PERT2

- it is weighted average of the three time estimates

When analysing complicated problems, it is important to always determine the probability

Source: PROJECT MANAGEMENT

Than Z, the number of standard deviations of a normal distribution is given by following

EPD ..expected duration,