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Chapter 9 Resource Allocation1. 2 Introduction This chapter addresses: Trade-offs involved to crash cost Relationship between resource loading and leveling.

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Presentation on theme: "Chapter 9 Resource Allocation1. 2 Introduction This chapter addresses: Trade-offs involved to crash cost Relationship between resource loading and leveling."— Presentation transcript:

1 Chapter 9 Resource Allocation1

2 2 Introduction This chapter addresses: Trade-offs involved to crash cost Relationship between resource loading and leveling Some approaches used to solve allocation problem

3 Chapter 9 Resource Allocation3 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 time/cost combination- called normal 2 nd combination called crash Normal – usual average time, resources Crash – expedite by applying additional resources

4 Chapter 9 Resource Allocation4 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) Critical Path Method – Crashing a Project

5 Chapter 9 Resource Allocation5 Slope = crash cost – normal cost crash time – normal time Critical Path Method – Crashing a Project 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

6 Chapter 9 Resource Allocation6 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.

7 Chapter 9 Resource Allocation7 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

8 Chapter 9 Resource Allocation8 Crashing a Project (E.g Two-Time CPM) ActivityPrecedenc e Duration, Days (normal,crash) Cost, $ (normal,crash) Slope ($/day) a-3,240, 8040/-1 = -40 ba2,120, 8060/-1 = -60 ca2,220, 20Cannot be expedited d*a4,130, 12090/-3 = -30 e**b3,110, (2 days) *Partial crashing allowed **Partial crashing not allowed

9 Chapter 9 Resource Allocation9 A CPM Example a c b d e Normal Schedule, 8 days, $120

10 Chapter 9 Resource Allocation a c b d e a c b d e ac b d e 7-day schedule, $1606-day schedule. $220 5-day schedule, $ a c b d e 4-day schedule, $350

11 Chapter 9 Resource Allocation11 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

12 Chapter 9 Resource Allocation12 On the cost side, figure below shows the time/cost relationship of crashing the project All crash a + b + 2d + 2e a + d + 2e - b a + b a All normal

13 Chapter 9 Resource Allocation13 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

14 Chapter 9 Resource Allocation14 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 Fast Tracking (cont.)

15 Chapter 9 Resource Allocation15 SOLVED PROBLEM ActivityCrash Time, Cost Normal Time, Cost Partial crashing a3,$60 No b6,807,30Yes c2,905,50No d5,506,30No e2,1004,40Yes a b e c d Find the lowest cost to complete the project in 10 days

16 Chapter 9 Resource Allocation16 Answer Current time and cost: 12 days and $ a b e c d Since the critical path is a-c-e, we only initially need consider these 3 activities: a: cannot be crashed c: can cut 3 days at an extra cost of $40 but only results in project completion by day 11, due to b. To reach 10 days, cut b by 1 day, total extra cost $90 e: can cut e by 2 days for an extra cost of $60 and results in project completion by day 10. Thus, cut e 2 days at a cost of $60.

17 Chapter 9 Resource Allocation17 RESOURCE ALLOCATION PROBLEM A fundamental measure of the PMs 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

18 Chapter 9 Resource Allocation18 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

19 Chapter 9 Resource Allocation19 Resource Usage Calendar

20 Chapter 9 Resource Allocation20 Modified PERT/CPM AOA Diagram (Refer Ch 08 Slide 26) a (4,0) b (2,1) c (3,1) dummy h (0,2) d j (0,6) e (2,1) f (1,1) i (6,3) g (1,0)

21 Chapter 9 Resource Allocation21 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

22 Chapter 9 Resource Allocation22 E.g: Network a, 2 [2] c, 5 [4] b, 3 [2] The activity time is shown above the arc, and resource usage (one resource, workers) is in brackets below the arc.

23 Chapter 9 Resource Allocation23 Before Resource Leveling bb cc a c Days c b a WorkersActivity

24 Chapter 9 Resource Allocation24 After Resource Leveling a c b Days c b a Activity Workers

25 Chapter 9 Resource Allocation25 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?

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