Operations Management: An Integrated Approach, 5th Edition

ESTIMATING THE PROBABILITY OF COMPLETION DATES

An advantage of using probabilistic time estimates is the ability to predict the probability of project completion dates. We learned how to calculate the expected time for each activity with the three time estimates provided. Now we need to calculate the variance for each activity. The variance of the beta probability distribution for each activity is

where p = pessimistic activity time estimate

o = optimistic activity time estimate

EXAMPLE 16.6 Calculating the Variance of Activities

Calculate the variance of each activity in the Cables By Us project. Then calculate the variance associated with each connected pathway through the project.

• Before You Begin: The variance is calculated using the formula

• Solution:

Using activity A to illustrate the formula, the variance is 0.44:

Confirm the variances for the remaining activities as shown in Table 16-7. Then sum the total variances associated with each pathway. Confirm the values shown in Table 16-8.

Table 16-7 Project Activity Variance

Using the variance for each activity, calculate ...