A limitation of the CPM method is its assumption that all activity duration times are known. In real world situations, external factors such as late delivery of materials, bad weather, and so on can seriously delay the completion of a project.
The PERT approach acknowledges the existence of uncertainty and uses probability distribution to overcome the unpredictability attached to activity times. PERT depends on “past experience of a project manager to derive three time estimates for each activity which are then applied to the beta distribution.
In simulations where there are many unknown variables, the technique of simulation can be applied. Simulation is very useful for analysing problems that contain elements of uncertainty, especially if some or all the variables can be represented by probability distributions. The greatest flexibility for activity times is provided by individual distributions which are based on previous events. The following four steps outline a simulation approach for project management.
- Identify all paths through the network
- Establish probability distributions for all project activities
- Use Excel’s random number generator to generate activity times.
- Record simulation details and analyses the results
