Network Analysis (AQA A-Level Business): Revision Notes
Network analysis
What is network analysis?
Network analysis is a project management technique that helps businesses identify the most time-efficient way to complete a complex project. It's particularly useful when implementing business strategies, as it shows managers how to organise resources and activities effectively.
The main purpose of network analysis is to determine the quickest way to finish a set of tasks. This makes it an essential tool for project planning, especially when multiple activities need to be coordinated.
How network analysis works
Network analysis follows a structured four-step process:
1. Identify activities and their sequence
The first step involves listing all the various activities that make up the project. You must also work out the order or sequence in which these activities need to be performed. Some tasks can happen simultaneously, while others must be completed before the next can begin.
2. Estimate the duration
For each activity, managers estimate how long it will take to complete. This duration might be measured in days, weeks, or months depending on the project scope.
3. Arrange activities as a network
The activities are then arranged as a network or graph. This visual representation shows the whole project from start to finish. Importantly, it displays which tasks can be performed at the same time. For larger, more complicated projects made up of many activities, computer programs are often used to construct the network.
Creating a network diagram becomes increasingly valuable for complex projects with many interdependent activities. The visual nature of the network makes it easier to see relationships between tasks that might not be obvious in a simple list.
4. Identify the shortest time and critical path
The final step involves finding the shortest time required to get from start to finish. The sequence of tasks that must be done one after another with no gaps in between to complete the project as quickly as possible is called the critical path. Activities on the critical path are known as critical activities — if they're delayed, the whole project is delayed.
Understanding the critical path
The critical path represents the longest sequence of dependent tasks that determines the minimum time needed to complete a project. Even though it's called a "path," it's actually the sequence that takes the most time.
Critical activities are those that sit on the critical path. These activities require close supervision because any delay will push back the entire project completion date. There is no flexibility or "spare time" with critical activities.
In a network diagram, different paths may exist from start to finish. However, only the path with activities that must happen in strict sequence — with no time to spare between them — is the critical path.
Worked Example: Identifying the Critical Path
If a project has tasks A, B, C, D, and E, and tasks C and D can happen at the same time after B is completed, then C and D are not both on the critical path. The critical path would include whichever sequence (A→B→C→E or A→B→D→E) takes the longest time.
Understanding nodes
In a network diagram, nodes are represented by circles. They show where one activity stops and another activity begins.
Node Structure: Three Key Parts
Each node is split into three parts, each containing important information:
The left section: node number This simply identifies which node it is in the sequence.
The top-right section: earliest start time (EST) This shows the earliest time that the activity following the node can start. It represents the earliest time from the beginning of the project that the next activity can begin, assuming all previous activities are completed as quickly as possible.
The bottom-right section: latest finishing time (LFT) This shows the latest time that the activity before the node can finish without delaying the entire project. If there's more than one activity going into the node, this is the LFT of the activity with the longest duration.
Identifying the critical path using nodes:
If the EST and LFT are the same for a node, then that node sits on the critical path. This means there's no spare time — the activity must start at the earliest possible moment and finish by the latest time without any flexibility.
Key timing calculations
Network analysis involves several important time calculations that help managers understand when activities must start and finish.
Earliest start time (EST)
EST stands for earliest start time. This is calculated as the number of days, weeks, or months from the start of the project.
An activity cannot start until the previous activity has been completed. You work out EST by adding the duration of the previous activity to its EST. The EST of the very first activity in any project is always 0 (because it starts at the beginning).
Worked Example: Calculating EST
A business wants to trade internationally. Their strategy involves opening a new office (1 month), hiring new staff (3 months), producing the product (6 months), and launching the product in the new market (2 months). The EST for producing is:
Earliest finishing time (EFT)
EFT stands for earliest finishing time. It represents the time that an activity will finish if it's started at the earliest start time.
To calculate EFT, you add the activity's duration to its EST.
Formula:
Worked Example: Calculating EFT
Using the same business scenario, if the EST of producing is 4 months and it takes 6 months, the EFT of producing is:
The EFT isn't usually shown on the nodes of a network diagram.
Latest finishing time (LFT)
LFT stands for latest finishing time. This is the latest time by which an activity can be completed without holding up the completion of the whole project.
LFT is calculated by working backwards from the final node. The LFT of the final node is equal to the EST of the final node (because the project must finish at that point).
To work out the LFT of any node before the final one, you subtract the duration of the next activity from its LFT.
Worked Example: Calculating LFT
If a business needs a product launched by the end of month 12, and the hiring stage takes 2 months, the LFT of hiring is:
(working backwards through the activities)
Latest start time (LST)
LST stands for latest start time. It's the latest time an activity can be started and still be finished by its LFT.
To calculate LST, you subtract the duration of the activity from its LFT.
Formula:
Worked Example: Calculating LST
If the LFT of hiring is 4 months and hiring takes 3 months, the LST of hiring is:
The LST isn't typically shown on network diagram nodes.
Float time
Float time is the spare time available for an activity. Only non-critical activities have float time. Critical activities have zero float time because they must be completed exactly on schedule.
Total float is the length of time you can delay an activity without delaying the completion of the project.
You can calculate total float using this formula:
Float time is valuable because it shows which activities have flexibility. For example, if task B has a total float time of 1 day and task G has 9 days, you know that task B must be monitored more closely than task G.
If critical tasks start late or take longer than expected, the project cannot be completed on time unless individual activities are completed more quickly than originally predicted.
Dummy activities
A dummy activity is an imaginary activity included in a network diagram. It doesn't represent actual work but shows that one activity is dependent on another.
Purpose of Dummy Activities
Dummy activities clarify dependencies between tasks. They show which activities must be completed before others can start.
Example: If task E cannot start until both task B and task C have finished, a dummy activity between the completion of task B and task C to the start of task E makes this dependency clear. Without the dummy activity, it might look as though task E was only dependent on one task instead of both.
On a network diagram, dummy activities are typically shown as dotted lines and connect nodes to show these dependencies clearly.
Using network analysis for time management
Network analysis is particularly valuable for time management when implementing strategies or planning complicated projects. Here are five key uses:
1. Planning complex projects
Network analysis is used when implementing a strategy or planning a complicated project, such as launching a new product or building a new office block. It provides a structured approach to managing all the activities involved.
2. Resource availability planning
It allows companies to work out when they'll need resources to be available. For example, managers can determine that a certain machine will need to be free on Friday, or that a new office must be open and ready to use 15 months into a project. This helps with scheduling and resource allocation.
3. Shortening the critical path
In many cases, it's possible to shorten the critical path by allocating additional resources to an activity. For example, if sewing buttons onto jumpers is expected to take 5 days, but the company hired extra machinists, it might be possible to reduce this to 3 days. This can bring forward the project completion date.
4. Switching resources between activities
Some resources can be switched between activities. For example, recruiters can be moved from hiring manual labour to hiring managers depending on which activities need support. This is especially useful when non-critical activities have float time — resources can be temporarily reallocated to critical activities that need them more urgently.
5. Decision-making
Network analysis helps managers with decision-making. Knowing the latest finish time of a project makes it easier to decide when to launch an ad campaign or when to become a public company. It provides concrete timelines for important business decisions.
Advantages of network analysis
Network analysis offers several important benefits for project management:
1. Identifies critical activities
Network analysis clearly identifies the critical activities (those on the critical path) which need to be supervised closely to ensure they meet their deadlines. This helps managers focus their attention on the most important tasks.
2. Enables resource transfer
Resources can be transferred from activities with float time to critical activities if needed. For example, if some workers are packing items but the project is running behind on manufacturing, those people could change roles to help with making the products.
3. Parallel working across functions
If different functions such as finance, operations, marketing, and human resources can start work at the earliest start time, then the implementation of strategy can happen as quickly as possible. This saves considerable costs, including the opportunity costs of not working on other projects.
4. Cash flow forecasting
Network analysis helps firms forecast their cash flow. It provides definite earliest start times when cash will need to be spent by different functions. This allows the firm to budget accurately and ensure sufficient funds are available when needed.
5. Finds the shortest completion time
Network analysis determines the shortest time possible for completing a complex project. This can give a business a competitive advantage, as being first to market or completing a strategy implementation ahead of competitors is valuable. It's an important element of time-based management.
6. Excellent visual aid
It's a strong visual aid for communications. The network diagram shows at a glance which steps take place at the same time and which activities have float time. This makes it easier for teams to understand the project structure.
7. Forces systematic thinking
Network analysis encourages managers to think carefully about the activities involved in a strategy. Without the systematic approach of network analysis, some important tasks might be forgotten or overlooked.
8. Progress monitoring
Network analysis can be used to review progress on individual tasks. For example, if a task overruns its float time, managers can immediately see whether it will delay the overall project or just the next activity in sequence.
Flexibility for changes
If there are changes and modifications to the progress of the project, the network can be amended as the project goes on. This allows for adaptive project management.
Disadvantages of network analysis
Despite its benefits, network analysis has several limitations:
1. Relies on estimates
Network analysis relies on estimates of how long each task will take. If these estimates aren't accurate, the whole analysis will be wrong. Time estimates are often based on experience or best guesses, which may not reflect reality.
2. Time-consuming to create and amend
Constructing and amending the network requires a significant amount of planning and time. For complex projects with many activities, drawing and updating the network can become a substantial task in itself. This might not be practical for smaller projects or businesses with limited resources.
Quality vs. Speed Trade-off
Network analysis sets tight deadlines, especially for critical activities. It's tempting for employees to cut corners in the rush to meet deadlines, which means that quality can suffer. The pressure to stay on schedule might lead to substandard work.
4. Doesn't show costs or quality
Network analysis can't tell you anything about costs — or anything about how good the project is. It focuses purely on timing and sequencing. A project might be completed on time but over budget, or delivered quickly but with poor quality outcomes.
Remember!
Key Points to Remember:
-
Network analysis determines the fastest way to complete a complex project by identifying the sequence of activities and their dependencies.
-
The critical path is the sequence of tasks with no spare time between them — any delay to critical activities will delay the entire project.
-
Nodes show three key pieces of information: node number (left), earliest start time or EST (top-right), and latest finishing time or LFT (bottom-right). When EST equals LFT, the node is on the critical path.
-
Float time (calculated as ) shows the spare time available for non-critical activities. Only non-critical activities have float time — critical activities have zero float.
-
Network analysis is valuable for time management of strategies because it helps with planning, resource allocation, and decision-making, but it has limitations including reliance on estimates and not showing costs or quality.