Analysis Of Cost And Schedule Performance

Earned Value Management Analysis (EVM)

The paper mainly reflects on the organization “D.U Singer Hospital Products Corp.” The organization has conducted a lot of new product-based development at both the development and research level for estimating a very much high likelihood regarding the technical success of the product in order to achieve assured commercial success. The organization focuses on developing a long-term antiseptic. The responsibility of the project is mainly assigned to the research and development group. The responsibility of project management is provided to Mike Richards, who is the project scientist and who is involved in the development of the product. After 32 weeks of implementation of the project schedule, the paper focuses on analyzing the progress of the project. The cost and schedule performance of the project are identified with the help of both EVM and EDM for comparing the results by using both methods. Additionally, the paper also focuses on the executive committee’s decision and the reason behind it. Furthermore, the paper also discusses the method through which the schedule of the project can be reduced by ten weeks so that the project can be delivered quite early. Moreover, the crashing method is mainly applied during the progress of the project for handling the schedule of the project and for managing the delay such that the total duration of the project generally gets reduced by ten weeks.

It is identified that in order to analyze the cost and schedule performance of the project, two different methods are used, which are mainly elaborated below:

Earned Value Management Analysis (EVM)

The earned value management (EVM) is a PM method that helps in assessing the work progress against the developed baseline plan. This particular method is mainly used for allowing the project managers to measure the amount of work that is mainly performed in the project (Batselier & Vanhoucke, 2017). By using the measured progress, it becomes easy for the project managers to make a proper prediction regarding the project cost. The EVM calculation is mainly done by calculating the cost performance indicator (CPI) and schedule performance indicator (SPI).

According to Babar, Thaheem and Ayub (2017), the cost performance indicator is considered as a method that helps in calculating the cost efficiency as well as financial effectiveness of the project. At the same time, the schedule performance indicator helps in measuring how close the project schedule is to being completed compared to the project schedule.

Earned Duration Management (EDM)

The D.U Singer Hospital Products Corp project is analyzed after 32 weeks for calculating the schedule performance indicator and cost performance indicator. The calculation for the project is mainly provided in the below table.

Figure 1: SPI and CPI Calculation

(Source: Created by Author)

As per the above calculation, the planned value, earned value and actual costs are identified below.

Earned value= 15372000.2

Actual cost= 16208000.2

Planned value= 16150000.2

Schedule Performance Indicator (SPI)= EV/PV

=0.95

Cost Performance Indictor (CPI)= EV/AC

=0.95

The SPI of the project is 0.95, which means that the project is running behind schedule. Additionally, the CPI of the project is also 0.95, which is less than one, which means that the project is over budget. The EVM analysis helps in indicating that both the cost and time of the project are not on track, and as a result, the chances of schedule slippage as well as budget shortfall during the project are quite high.

Earned Duration Management (EDM)

Earned Duration management is a method that concentrates on the project schedule. EDM method is very much similar to the EVM method; however, it only accounts for the duration of the project activity. While the project is progressing, the EDM method is mainly utilized for checking the performance of all the activities of the project, which will be executed in order to finish the project work (Balali et al., 2020). EDM method is applied within the D.U Singer Hospital Products Corp project for analyzing the performance of the project schedule. The calculation of EDM is mainly provided in the below table.

Task	Percentage complete	Planned duration	Actual duration	Earned duration
Product rationale	100	8	10	8
Development of formula	100	12	15	12
Product specification	100	3	5	3
Reg Documents	100	3	7	3
Dev. Packaging concept	100	8	9	8
Design package	100	6	9	6
Dev. Processing system	50	6	2	3
Dev. Packaging system	60	8	4	4.8
			61	47.8
DPI	0.8

The table that is provided above showcases percentage complete for each activity planned duration, actual duration and earned duration. The cumulative value of the actual duration till 32 weeks is around 61, whereas the earned duration till 32 weeks is around 48.8.

DPI= Earned duration/ Actual duration

= 47.8/61

= 0.8

As per the calculation, the DPI index for the project is 0.8, which is less than one, which reflects that the current project is not on track and it is running late.

While analyzing the project with the help of both the EVM and EDM methods, it is identified that the project is not on track, and the project is currently experiencing a delay. The project is running behind schedule, and thus, it is quite difficult to meet the deadline of the project if the project team does not generally take the correct initiative to reduce the total project duration. Moreover, the CPI that is calculated using the EVM method also helps in reflecting that the total cost, which is mainly allocated within the project, is not sufficient, and the project is presently experiencing financial hurdles due to being over budget. Thus, it is quite necessary for the steering committee to take the right action in order to handle and manage the schedule and cost of the project to avoid the issues like schedule slippage and budget shortfall.

Action of the Executive Committee

After analyzing the situation with the help of the EVM and EDM method, it is quite essential for the steering committee to take the right action in order to manage both the time of the project. The executive committee must utilize the crashing method so that by using that particular method, they can be able to reduce the total project duration such that the work of the project gets finished within the allocated time. Additionally, crashing within the entire project is generally done by increasing the project resources, which also helps the tasks in taking less time in comparison to the time that is planned for each of the activities of the project (Abdi, Taghipour & Khamooshi, 2018). The main objective of crashing is to shorten the total duration of the project while keeping the cost at a minimum. It is identified that if the end date of the project needs to be effectively anticipated, then crashing helps in compressing the project with the least impact and the lowest cost. With the help of this method, the project team can easily bring the entire project on track and can avoid all the challenges that are associated with schedule slippage as well as a budget shortfall.

It is also essential for the executive committee to take the right action in such a situation. Otherwise, the project will experience schedule slippage that will further delay the entire progress of the project. Due to schedule slippage, it becomes quite difficult to achieve the deadline for each of the project tasks that need to be executed in order to accomplish the goals of the project. Schedule slippage not only causes delay; however, it also enhances the total cost of the project, which further creates financial difficulties for the project team. Thus, it is quite essential for the steering committee to take the right initiative to handle the situation well.

After analyzing the performance of the project after 32 weeks, it is identified that the total duration of the project has increased from 37 weeks to 43 weeks. The project team finds it quite difficult to handle the project as with the increase in total time, the total cost of the project also increases. The chances of problems like delay and budget shortfall become more prominent, and as a result, it would impact the success of the entire project. It is identified that in order to avoid challenges like schedule slippage and budget shortfall problems, it is quite necessary for the project team to take the right action for successfully handling the work of the project (Ballesteros-Perez et al., 2019). The management of the project asked the project team to reduce the total duration of the project by ten weeks; however, it must be done in a proper logical way. The management also warns the team to avoid fast-tracking and illogical methods to reduce the total duration of the project as it is not valuable for the project.

The team decided to reduce the total duration of the project with the help of the crashing method. Crashing is considered as one of the important techniques that help in reducing the total duration of the project activity by adding more resources such that the project gets completed early as per the planned date of the project. Though the crashing method also adds cost to the project, therefore it must be done in such a way that the cost of the project increases by a minimum so that the team does not experience many challenges in handling the situation well (Ou-Yang & Chen, 2019). In order to apply the crashing method within the project, the first and the most important step is to analyze the critical path of the project. This is needed for determining the project tasks, which can be shortened in order to bring the project much closer to the new deadline. Secondly, the tasks that are on the critical path are identified and then crashing is applied so that the total duration of each of the activities that are selected gets reduced, which further helps in reducing the total time of the project.

It is identified that when the crashing method is mainly applied within the D.U Singer Hospital Products Corp project, then the total duration of the project gets reduced by 10weeks. After crashing, the total duration of the project reduces from 43 weeks to 33 weeks. The figure that is provided below showcases the activities that are crashed in yellow. The activities are crashed by increasing the total resources of the project, and as a result, the project activities need less time in comparison to the time that is needed. The critical activities of the project are identified, and then the activity which will create less impact on the cost of the project is used for crashing. After crashing the activities, the critical path sometimes changes and after then, the same procedure is followed again until the time when the total duration of the project reduces (Chitra & Halder, 2017).

By using the procedure, the total duration of the project reduces by ten weeks, and now the present time that is needed for accomplishing the goals and objectives of the project is around 33 weeks. Additionally, the cost of the project increases; however, the cost that is increased is minimal, and it will not affect the success of the project much more. 

Figure 2: Earned value

(Source: Created by Author)

Conclusion

It can be concluded from the paper that for minimizing the total duration of the project, the crashing method is mainly used. With the help of crashing, the total project duration reduces by increasing the number of resources and by ensuring that the cost of the project increases by minimal. The paper also undertakes earned value analysis (EVM) and earned duration management (EDM) for analyzing the performance of the project so that the steering committee takes the right initiative for handling the situation of the project quite well. Furthermore, the paper also provides the initiative that is taken by the steering committee and the reason behind it. It is identified that with the help of crashing, the project team can easily bring the entire project on track and can avoid all the challenges that are associated with schedule slippage as well as budget shortfall quite well.

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