Chapter 9 Resource Allocation

Chapter 9 Resource Allocation 1

Introduction



This chapter addresses:

   Trade-offs involved to crash cost Relationship between resource loading and leveling Some approaches used to solve allocation problem Chapter 9 Resource Allocation 2

Critical Path Method – Crashing a Project

       One important difference between CPM & PERT:  CPM included a way of relating the project schedule to the level of physical resources trade time for cost, or vice versa Can specify 2 activity times and 2 costs 1 st 2 nd time/cost combination- called normal combination called crash Normal – usual ‘average’ time, resources Crash – expedite by applying additional resources Chapter 9 Resource Allocation 3

Critical Path Method – Crashing a Project

   Allocation problem requires more careful consideration-additional resources?

Many things make crashing a way of life on some projects (i.e last minutes changes in client specification, without permission to extend the project deadline by an appropriate increment) Careful planning is critical when crashing project – need to consider feasibility of expediting work (e.g equipment availability) Chapter 9 Resource Allocation 4

Critical Path Method – Crashing a Project

Slope = crash cost – normal cost crash time – normal time Where: slope = cost per day of crashing a project When slope is negative : indicate the

time

required for a project is

decreased

, the

cost

is

increased

Chapter 9 Resource Allocation 5

   The dollars per day slope of activities is relevant only if the whole crash increment is useful Crashing may involve a relatively simple decision to increase groups of resources (labor-shovel, Ditch-Witch Technology) If do changes in technology tend to produce discontinuities in outcomes and also in cost.

Chapter 9 Resource Allocation 6

Principles to crash a project

1.

Focus on the

critical path

when trying to shorten the duration [resource ready] 1.

Select the

least expensive

way to do it Chapter 9 Resource Allocation 7

Crashing a Project (E.g Two-Time CPM)

Activity a b c d* e** Precedenc e a a Duration, Days (normal,crash) 3,2 Cost, $ (normal,crash) 40, 80 2,1 2,2 20, 80 20, 20 a b 4,1 3,1 30, 120 10, 80 Slope ($/day) 40/-1 = -40 60/-1 = -60 Cannot be expedited 90/-3 = -30 -70 (2 days) *Partial crashing allowed 8

A CPM Example

1 a 2 3 b c d 4 5 e 6 7 8 Normal Schedule, 8 days, $120 Chapter 9 Resource Allocation 9

a 1 a 2 b c 3 d 4 5 e 6 e 7 7-day schedule, $160 8 a e b c d 1 2 3 4 5 6 7 6-day schedule. $220 8 a b c e b c d d 1 2 3 4 5 6 5-day schedule, $260 7 8 Chapter 9 Resource Allocation 1 2 3 4 5 6 7 4-day schedule, $350 8 10

   Network critical path is a-b-e, project duration is 8 days, normal total cost is $120 The decision about which activities to crash depends on how much to reduce the duration On the benefit side, some projects have penalty clauses that make the parent organization liable for late delivery sometimes bonuses for early delivery Chapter 9 Resource Allocation 11

 On the cost side, figure below shows the time/cost relationship of crashing the project

400 350 300 250 200 150 100 50 0 0 1

All crash a + b + 2d + 2e a + d + 2e - b a + b a All normal

8 9 2 3 4 5 6 Total duration (days) 7

Chapter 9 Resource Allocation 12

Fast Tracking

      Another way to expedite a project Term used for construction projects Refers to overlapping design and build phases Design completed before construction starts,so overlapping will result shortening the project duration Build before design completed-more design changes Loss productivity, increased cost, loss time Chapter 9 Resource Allocation 13

Fast Tracking (cont.)

  Studies revealed that:  more design changes in fast tracking – the number of project change orders not significantly different than not fast-tracked project Dependent on effective feed-back and feed forward communication Chapter 9 Resource Allocation 14

SOLVED PROBLEM

1 a b c 2 3 e d 4 c d e Activity Crash Time, Cost a Normal Time, Cost Partial crashing 3,$60 3,$60 No b 6,80 7,30 Yes 2,90 5,50 5,50 6,30 2,100 4,40 No No Yes Find the lowest cost to complete the project in 10 days Chapter 9 Resource Allocation 15

0 1 3 a b 7

Answer

Current time and cost: 12 days and $210 3 2 Since the critical path is a-c-e, we only initially need consider these 3 activities: a: cannot be crashed d 6 c 5 3 8 4 e 4 12 c: can cut but only results in project completion by

day 11 b

by

3 days

, due to at an extra cost of

b

. To reach 10 days,

1 day

, total extra cost

$90 $40 cut

e: can

$60 cut e by 2 days

day 10.

for an extra cost of and results in project completion by Thus, cut e 2 days at a cost of $60.

Chapter 9 Resource Allocation 16

RESOURCE ALLOCATION PROBLEM

 A fundamental measure of the PM’s success in project mgmt is the skill with which the trade-offs among performance, time and cost are managed  The extreme points of the relationship between time use and resource are:  Time limited  Resource limited Chapter 9 Resource Allocation 17

RESOURCE LOADING

   The amount of individuals resources an existing schedule requires during specific time periods Resource loading can be illustrated by:  Resource usage calendar  Modified PERT/CPM AOA diagram (similar with Gantt Chart) PM responsibility:   Demand for resources does not exceed resource capacities Ensure that the required resources, in the required amounts Chapter 9 Resource Allocation 18

Resource Usage Calendar

Chapter 9 Resource Allocation 19

1 1 1 0

Modified PERT/CPM AOA Diagram (Refer Ch 08 Slide 26)

a (4,0) c (3,1) b (2,1) 4 4 2 3 3 dummy 3 g 5 (1,0) h (0,2) d e (0,2) (2,1) f (1,1) i (6,3) 6 j (0,6) 7 5 10 15 20 25 Chapter 9 Resource Allocation 30 35 40 45 20

   

RESOURCE LEVELING

Aims to minimize the period-by-period variations in resource loading by shifting tasks within their slack allowances Purpose to create a smoother distribution of resource usage Advantages;  Much less hands on management  Be able to use ‘just in time’ inventory policy with right quantity delivered If the resource being leveled is people, it improves morale and results in fewer problems in the personnel and payroll offices Chapter 9 Resource Allocation 21

E.g: Network

1 a, 2 [2] c, 5 [4] b, 3 [2] 2 3 4 The activity time is shown above the arc, and resource usage (one resource, workers) is in brackets below the arc.

Chapter 9 Resource Allocation 22

Before Resource Leveling

a b c a 1 2 Days 3 4 5 Chapter 9 Resource Allocation c c b 1 b 2 Days 3 c 4 5 23

After Resource Leveling

a b c 1 2 Days 3 4 5 Chapter 9 Resource Allocation a c 1 2 Days 3 b 4 5 24

RESOURCE LOADING/LEVELING AND UNCERTAINTY  If happens excess capacity,the alternative that we can consider:  Try to level the demand, moving some of it forward and some backward   Try to alter the supply of working hours-trade off time between periods of over capacity and periods of under capacity Might expend additional resources-contract worker for overload period, subcontract the workload  Which cheaper?Delay or subcontract?

Chapter 9 Resource Allocation 25