Chapter 9 Resource Allocation

Chapter 9 Resource Allocation 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

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 1st time/cost combination- called normal 2nd combination called crash Normal – usual ‘average’ time, resources Crash – expedite by applying additional resources Chapter 9 Resource Allocation

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

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

Chapter 9 Resource Allocation 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

Principles to crash a project Focus on the critical path when trying to shorten the duration [resource ready] Select the least expensive way to do it Chapter 9 Resource Allocation

Crashing a Project (E.g Two-Time CPM) Activity Precedence Duration, Days (normal,crash) Cost, $ (normal,crash) Slope ($/day) a - 3,2 40, 80 40/-1 = -40 b 2,1 20, 80 60/-1 = -60 c 2,2 20, 20 Cannot be expedited d* 4,1 30, 120 90/-3 = -30 e** 3,1 10, 80 -70 (2 days) *Partial crashing allowed **Partial crashing not allowed Chapter 9 Resource Allocation

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

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

Chapter 9 Resource Allocation 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

Chapter 9 Resource Allocation 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 Chapter 9 Resource Allocation

Chapter 9 Resource Allocation 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

Chapter 9 Resource Allocation 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

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

Chapter 9 Resource Allocation Answer Current time and cost: 12 days and $210 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. 3 1 2 4 a b e c d 7 5 6 8 12 Chapter 9 Resource Allocation

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

Chapter 9 Resource Allocation 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

Resource Usage Calendar Chapter 9 Resource Allocation

Modified PERT/CPM AOA Diagram (Refer Ch 08 Slide 26) 5 10 15 20 25 30 35 40 45 4 1 2 3 6 7 a (4,0) b (2,1) c (3,1) dummy h (0,2) d j (0,6) e f (1,1) i (6,3) g (1,0) Chapter 9 Resource Allocation

Chapter 9 Resource Allocation 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

Chapter 9 Resource Allocation E.g: Network 2 a, 2 [2] 1 c, 5 4 [4] b, 3 [2] 3 The activity time is shown above the arc, and resource usage (one resource, workers) is in brackets below the arc. Chapter 9 Resource Allocation

Before Resource Leveling 1 2 3 4 5 10 8 6 b c a 1 2 3 4 5 c b a Days Activity Workers Days Chapter 9 Resource Allocation

After Resource Leveling 10 1 2 3 4 5 c b a Days Activity 8 Workers 6 a b 4 c 2 1 2 3 4 5 Days Chapter 9 Resource Allocation

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