Case 13.1: Kaushik Mills
Kaushik Mills decided to increase its production capacity by building a new feed mill. The project consisted of a number of separate tasks, some of which could not be started before others were complete. Exhibit 1 lists the activities, along with the times expected for each, as ‘agreed upon by management and the precedence relationships’.
The management wanted to advance the schedule as much as possible in order to save valuable time in getting the new mill into operation. The president of the mills commented: “Every week saved is worth Rs 70,000 in lost contribution if we can get going.”
Some of the construction activities could be sped up. For example, the firm’s architects could by working overtime, design the new plant in 10 weeks instead of the originally estimated 12 weeks. This advancement would cost the mills an additional Rs 25,000 per week that is advanced. The following table shows the maximum amount each activity could be crashed as well as the crash cost per week.
The president of mills had already held discussions with mill contractors, an independent firm which was a potential contractor for one of the projects major tasks, for building the plant. Kaushik Mills intended to do the other tasks either itself or through its agents. During the talks with mill contractors, the management had explored a number of bonus and penalty clauses. One of these was that for every week that the plant was built ahead of 10 weeks, the mills would pay contractors an additional Rs 75,000.
The management of Kaushik Mills desires to know which activities it would crash and how it should schedule its workers.
